Seeking Alpha
Newsletter provider, ETF investing, long only
Profile| Send Message|
( followers)  

The currency wars have started to filter into quarterly corporate confessions, but some of the results have been surprising. Here are a few of the tickers we are watching.

Brazil: Fibria (NYSE:FBR) is another world-class Brazilian company suffering from the effects of the currency wars.

FBR managed to more than double its third-quarter profits thanks to a stronger U.S. dollar, which magnified the bottom-line impact of otherwise flat sales. Asian customers simply were not willing to buy more pulp from Brazil when cheaper currency-adjusted local alternatives were available. As a result, FBR disappointed the analysts, who had expected much better results — and now do not expect a significant fundamental improvement ahead unless the Brazilian real somehow weakens.

INDIA: Ranbaxy Labs (OTC:RBXZF) is thinly traded in ADR format, but is still India’s biggest drug maker, dwarfing the size of better-known (and more widely traded) rival RDY.

RBXZF is on the opposite side of the currency wars, as a strong rupee helped it double its profits in the third quarter, even though its sales edged up less than 10%. The company is interesting because it is not so much an exporter as a name with direct exposure to the Indian domestic consumer; as such, it stands to gain from a stronger native currency because it can now acquire raw materials from outside India more cheaply, without having to fight other global pharma companies for share.

CHINA: AU Optronics (NYSE:AUO) is technically a Taiwanese name, but does an enormous amount of business on the mainland. This stock became a simple M&A story last week on rumors that it is talking about local competitor Chunghwa about a merger of LCD interests.

This stock and its rivals could be in play next week, so be on the lookout.

ETFs in the Spotlight

Hints of inflation have sent gold prices to new peaks and contributed to 33% YTD gains for gold miner fund GDX. Are gold miners a better play than bullion? If this is truly an inflationary story, the answer is yes.

Because many of these companies take on massive amounts of debt in order to build their mines, inflation has the effect of reducing the real cost of that debt, effectively inflating it away. However, the value of their bullion in the ground remains relatively constant. It is a win, in other words — and a potential source of value over and above speculation in the precious metals markets.

While funds that specialize in a particular country have fared better, no truly global emerging markets fund has outperformed EMFN so far this year. The secret? EMFN is heavily invested in some of the world’s best banks — familiar names around here like IBN, ITUB, BSBR, HDB and CIB — and a few names we will be watching like SHB.

Unlike their peers in North America and Western Europe, these banks kept their balance sheets clean and their powder dry during the credit crunch. They are now aggressively expanding, and should become powerhouses in the next banking cycle.

Disclosure: No position

Source: BRIC Watch: 3 ADRs, 2 ETFs