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Strategies for Stocks in a Weak Dollar Era (Part 2)

6 November 2007 - Features - Editor

How Transnational Corporation Stocks Are Affected by Currency Trends

Small investors, with decks of stocks stacked against their future prospects, would do well to build their portfolios around U.S. corporations with global brands that have significant shares in the first world and in emerging countries as well. This is why stocks of celebrity software companies and electronic chip manufacturers should be so popular with investors at this time: they stand to gain no matter which way the dollar may move. It would not be unreasonable to conclude that stocks of transnational corporations with global brands and with subordinate entities in key foreign markets are best buys during uncertain times.

The pharmaceutical and automobile industries of the United States are fundamentally different from captive sectors such as civilian aircraft. The world can only choose between Airbus and Boeing, so the latter is relatively immune from a weakening of the dollar, and may even score some points against its rival as the Euro appreciates. However, a weak dollar may not help companies such as Schering-Plough or even Merck, because they simply do not have the research brands to compete on a world stage. The less said about the competitive abilities of Detroit, the better! U.S. investors have therefore to look beyond the Atlantic and invest in Swiss and UK stocks to make money from the latest drugs, and count on Japanese stocks for their profits from the automobiles sector.

Currency Proof Stocks

Stocks of companies with rights to abundant natural resources are also good hedges for small investors against a weak dollar, or any other poorly managed currency. Gold is a wonderful example of almost inevitable demand growth, controlled supply, and classic inflation-proof capabilities. Stocks of nuclear fuel and power station suppliers are also good buys because the U.S. rules who can buy the stuff, regardless of how worthless the dollar may become! Some sectors such as hydrogen fuel cells are not well established as yet, but clever investors will not miss opportunities to buy stocks of professionally managed units.

The world needs to return to the post World War II agreement that lent some order to the chaos of relative currency values. The situation in which some governments abdicate their responsibilities with respect to their economies cannot co-exist with other countries using their bank notes are weapons of financial warfare! Perhaps the trading of stocks should be in some uniform currency, to establish some semblance of order! Unfortunately, these matters are not in the hands of ordinary owners of and traders in stocks, so eternal vigilance is the price for profits!

 


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