Shorting the Dollar, Via These Three Multinationals

Includes: BTI, FXC, FXE, KO, ORCL
by: HiddenLevers

With seemingly endless budget deficits and the trade deficit again rising, many investors are looking to play against the dollar. While it’s become easier than ever to play the forex market directly, investing directly in currencies isn’t for everyone. Currency ETFs like FXE, FXC, and others are another choice – but ETFs can suffer from fees and tracking error over time. Can an investor short the dollar by playing the right stocks, and if so, how to find them?

Here’s a chart of a company that few think of as a dollar short play:

(Chart created using Hidden Levers app)

With 70% of its revenue coming from overseas, Oracle (NASDAQ:ORCL) has a strong inverse correlation with the dollar. If the dollar plunges, Oracle’s bottom line improves, as does the bottom line of other major U.S. exporters. Here are two more companies (one is an ADR) which have shown a strong negative relationship with the dollar:

(Chart created using Hidden Levers app)

Coca-cola (NYSE:KO) derives most of its revenue internationally as well, making it negatively correlated with the dollar. Interestingly, KO has no statistical relationship with inflation (CPI). KO is not a play on the commodities rally – but it is a play against the dollar.

(Chart created using Hidden Levers app)

British American Tobacco (NYSEMKT:BTI) has been another great play against the dollar, and has also followed copper (a key indicator of global growth). As an ADR, BTI benefits when the dollar is down, as its shares become more valuable in dollar terms.

Both KO and BTI act as leveraged plays against the dollar, while also providing steady dividend growth.

Disclosure: No positions in stocks and ETFs mentioned.