With the Australian dollar picking up, we asked a contributor panel for their views on which sectors to avoid, and which sectors could benefit. Today they go on to share four stocks they think offer a good risk-adjusted exposure to a rising AUD. Read on for responses from Chris Stott, Wilson Asset Management; Sam Berridge, Perennial Value; and Guy Carson, Tamim Asset Management.
Premier Investments an obvious beneficiary from rising AUD
Chris Stott, Wilson Asset Management
With iconic apparel brands including Portmans, Just Jeans and successful pajama label Peter Alexander, retailer Premier Investments (ASX: PMV) is an obvious beneficiary of the rising Australian dollar. A stronger dollar could provide a tailwind for the company and potentially lead to an expansion of its margins over the next two to three years.
With a management team consisting of some of the best retailers in the country, Premier also offers exposure to Smiggle, one of the fastest growing retail concepts in Australia and globally. In the first half of FY2017, worldwide Smiggle store sales were up 26.4% and Premier has a multi-year, store roll-out planned. The company has the ability to further expand its geographic footprint and could conceivably announce plans to enter new markets over the coming period.
2 small cap tech stocks leveraged to the Aussie
Guy Carson, Tamim Asset Management
Information Technology is the fastest growing sector on the global stage. In Australia, however, it represents less than 2% of our market. As a result, its products are sourced from offshore. A rising Australian dollar makes these products more affordable for Australian businesses and could lead to an increase in volumes. Two companies to benefit from this activity would be Data #3 and Dicker Data. Both companies have distribution businesses whilst Data #3 has an additional services division that leverages off its relationships and the products it distributes. Dicker Data has recently followed in Data #3 footsteps with the exciting announcement that it will partner with Japanese company Hitachi Data Systems.
Both Data #3 and Dicker Data trade on reasonable multiples, pay good dividends, are currently experiencing strong earnings growth and operate in an industry with structural tailwinds. As a result, they are currently two of our core holdings.
A well positioned medical device importer
Sam Berridge, Perennial Value
LifeHealthCare (LHC) imports high-end surgical consumables and medical devices. Demand for LHC products is being driven by an ageing population, and a steady stream of new technologies being introduced to the market. A substantial proportion of LHC product is sourced from the US, thus a higher AUD:USD would assist their gross margins if this move was sustained for a reasonable period.*
Winners and losers from a strong Aussie dollar
If you missed it yesterday, our panelists discussed which sectors to avoid, and which could benefit, if the strength in the Aussie continues: (VIEW LINK)