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DemonD
07-25-07, 11:54 PM
Perusing another website today, I came across a theory that rang true to me:

Large cap multinationals in non-cyclical industries will be the big winners as the US dollar devalues. Exports will go up, the sales in foreign countries repatriated to the US will be worth more, so they will profit coming and going. Since I can't do anything without an example, I will use Altria (an admitted favorite of mine) as an example. Cigarette prices have gone up domestically 6% this year, and almost all tobacco companies have been showing strong profits in international markets, where suddenly people have more disposable income. This disposable income, in yuan, euros, etc. then gets repatriated to the US giving you a back-door play on currency markets. Part of Altria's strong profits in the past few years has come from a weakening dollar and currency effects. Plus their products then become less expensive by comparison to export and transport.

There are plenty of companies that fit this situation. JNJ, MMM, HZ, KO, PEP, MSFT, PG, COV, GE, CL, WWY... on and on. Your basic blue chip dividend payers.

These companies will also be able to weather any downturn that may come along.

Discuss!

c1ue
07-26-07, 10:35 AM
DD,

Your theory has actually long ago been promoted to historical fact:

In the Weimar days, as inflation accelerated - so did the (German) stock market prices of companies with revenue coming from abroad. Argentina saw this also - Mexico did not really as they have very few companies that qualify as both Mexican and multi-national.

However, the actual behavior was different in that when the Weimar economy collapsed, so did all of those companies. It just meant they were last.

The key to note is whether these companies are growing in unit share either abroad or internally - and overall.

This so far that I have seen is not true, hence large cap multinationals are only good for loss mitigation, NOT loss abrogation. Or in other words, losing less money but still losing.