Seven Stocks for a Falling Loonie

The Canadian dollar is likely overvalued and could fall, benefiting a number of stocks, according to UBS strategist George Vasic.

“The Canadian dollar has actually held in relatively well given the plunge in commodity prices and risk appetite,” Mr. Vasic says in a note. He estimates that a value of $0.74-$0.77 is closer to fair in current circumstances.

The strategist says the strong 96% correlation between the loonie and commodity prices means potential winners lay outside the energy and materials sectors. And these names are to be found in industrials, consumer, financials and media stocks.

However, Mr. Vasic warns against viewing the impact of the Canadian dollar in isolation. “We asked our analysts to look at the full picture, so that the currency impact represents an enhancement to the underlying investment case,” he says.

Starting with most attractive, those considered most attractively positioned to benefit from a cheaper loonie in industrials are Canadian National Railway Co. (CNI), Bombardier Inc. (BDRAF.PK) and Canadian Pacific Railway Ltd. (CP).

In the consumer sector, Gildan Activewear Inc. (GIL) and Alimentation Couche-Tard Inc. (ANCTF.PK) make the cut. In financials, Bank of Nova Scotia (BNS) is the ideal selection, and in telecom/media, Cogeco Cable Inc. (CGEAF.PK).

Comments

[donzelion:]

A few months back, I'd have expected to see Nortel in the list of companies that should benefit. Alas...

Jan 18 11:31 AM