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Weak Dollar Helps Large U.S. Firms

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An article from the AP (hosted at the Huffington Post), notes that US companies have recently adjusted their strategies to focus abroad. Their presence abroad has aided their margins through gains on currency appreciations compared to the dollar. Here’s the meat of it:

“If you look at some of the companies that had good quarters, they’re doing half or more business abroad,” said Phil Orlando, chief equity market strategist at Federated Investors. “The weakness in the dollar is a significant benefit in currency translation, and for those companies that are developing products that will create a boost for export activity.”

And a specific example:

Take Coca-Cola Inc. for example. Buying a can of Coke cost $1 in the United States, but the equivalent of about $2 in the U.K. — one reason the beverage giant was able to sail past Wall Street profit projections earlier this week.

Recently, investors have recommended against using multinationals with a heavy international exposure. The weakening dollar is one case in which this is different. If you expect depreciation of the dollar, but do not want to purchase assets abroad, the US multinationals can be an alternative.

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Written by walonline

April 23, 2008 at 8:26 pm

Posted in Markets

Tagged with , , ,

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