- Why the Dollar is rising

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Why the Dollar is rising

Stock Ideas

Market Watch

By Chris Johnson We've commented on the softness in the semiconductor sector, which has been headed south while the rest of the market has rallied. With seasonal electronic sales about to get a boost from the holiday shopping season, it's strange to see the semiconductor group in its current weakened state.
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Why the Dollar is rising

Tuesday, 16 September 2008

By Andrew Gordon
The dollar has jumped 10 percent since early July. It’s still at historical lows, but now that it’s broken through its long-term trend, it could very well go up further. There’s lots of ways to trade a strengthening dollar. One of the ways is to bet against the companies hurt by a dollar increasing in value.
Companies that rely on exports and overseas sales for a substantial portion of their total revenue would certainly qualify.

In a matter of a couple of months, their goods and services have become around 10 percent more expensive in overseas markets.

Put another way, overseas customers are now paying a 10 percent premium on what they are now buying from U.S. companies.

It’s got to hurt sales and overseas sales revenue. And that is what some investors are counting on.

According to Bespoke Group, since mid-July, the 106 companies in the S&P 500 with more than 50 percent or their revenues coming from overseas markets have underperformed their benchmark index.

Why the Dollar is rising Investors are selling and playing them short.

The ten with the highest international exposure are:
Philip Morris International (100 percent exposure),
Newmont Mining (95 percent),
NVIDIA (92 percent),
Advanced Micro Devices (88 percent),
Texas Instruments (87 percent),
Qualcomm (87 percent),Intel (84 percent),
Applied Materials (84 percent),
AES (81 percent), and
Colgate Palmolive (80 percent).

Just because their shares aren’t performing well right now doesn’t mean that all these companies will make smaller profits. But it does put pressure on margins, cash flow and the bottom line.

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In the above list, I still like Philip Morris (PM). It’s done a good job of getting customers to trade up to its premium brands.

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