Seven Stocks That Will Benefit from Weaker Loonie

Expectations that the Canadian dollar will fall a few more cents lower could spell relief for a handful of stocks struggling from the economic slowdown, says UBS strategist George Vasic.

Noting that the Canadian dollar has had a 0.96 correlation to UBS’s basket of commodity prices since 1996, Mr. Vasic said he expects the loonie to fall from its current price based on new price estimates for commodities, include $38 oil, $4.80 natural gas, $975 gold and $1.55 copper.

The strategist said in a note to clients:

The short answer is that UBS’s trade-weighted basket of commodities would point to fair value in the 76-77 cent US range (or 1.31 inversely), which puts the 79 cent CAD somewhat above fair value.

As a result of a weaker loonie, Mr. Vasic identified seven stocks that investors should take a look at. They include Canadian National Railway Co. (CNI), Canadian Pacific Railway Ltd. (CP), Bombardier Inc. (BDRAF.PK), Gildan Activewear Inc. (GIL), Alimentation Couche-Tard Inc. (ANCTF.PK), Bank of Nova Scotia (BNS) and Cogeco Cable Inc. (CGEAF.PK).