Taking Shelter from the U.S. Dollar

With Marc Faber making the rounds and predicting that the US$ will go to zero, this week's screen for foreign stocks seems particularly timely. Unfortunately, investors looking to make a move now must contend with a very weak dollar, which makes overseas stocks more expensive. The specific criteria I used are listed below:

• (Domestic / Foreign = Foreign)
• (Current Year Free Cash Flow > 0)
• (Exchange not = OTC)
• (Dividend Yield % > 3)
• (Return on Assets % – Trailing 12 Months >= 15)

View complete results of the screen here in table format.

I was looking for solid foreign companies traded on a major US exchange. They needed to generate positive free cash flow in the most recent fiscal year with return on assets over 15% in that same time frame. I also wanted a nice dividend to get tangible benefits from a declining dollar as the actual dividend as paid in US dollars should increase even if the dividend in foreign currency remains constant.

The biggest flaw of this screen is excluding stocks traded over the counter. Many large and well-respected foreign companies do not list their stocks on an exchange for various reasons so keep that in mind.

The 15 companies seemed to bunch around the commodity and telecom industries and spanned the globe from Canadian oil trusts like Baytex (BTE) and Enerplus (ERF) to telecoms like China Mobile (CHL) and a pair of Israeli wireless companies. A handful of commodity shippers like Frontline (FRO) and Safe Bulkers (SB) also made the screen.

The near year-long rally combined with the drop in the US dollar means most of these stocks are near 52-week highs. Keep in mind that the 52 week period begins post-Lehman so some of these names may be coming off very low bases.

Check out the complete list of stocks in table format. Note that prices were as of 10/17/2009, when I ran the screen.

Disclosure: none

Comments

[bob adamson:]

Mr. Bui -

Your choice to hold Baytex Energy Trust and Enerplus Resources Fund are interesting. Why did you choose those over the following?

Penn West Energy Trust (PWE)

Nal Oil & Gas Trust (NAE.UN – T)

Vermilion Energy Trust (VET.UN – T)

Trilogy Energy Trust (TET.UN –T)

all listed on the Toronto Stock exchange.

The Canadian Dollar and the price of these trusts are likely to have a short and mild correction over the next few sessions largely because of their recent strong run-up. By your analysis might this not be a buying opportunity for these trusts or do you see problems with one or more on this list?

Oct 27 07:51 PM

[Augustus:]

Return on Assets > 15% kills the search.

Oct 27 11:46 PM

[smickw:]

DSX shouldn't be on the list. The dividend was suspended over a year ago!

Oct 28 06:23 PM