The U.S. dollar is making headlines. As of early January, the battered greenback was down more than 32% from its peak in early 2002 against the euro and roughly 20% against the Japanese yen.
With the U.S. running a huge trade deficit and huge budget deficit, many foreign investors are convinced that the U.S. government wants the dollar to continue to fall.
The outlook for the dollar is so bad that Warren Buffett, for the first time in his investing life, has bought foreign currencies. Buffett notes that he's been wrong before in his worries about the consequences of rising U.S. deficits, but, as he told Fortune magazine in late 2003, "this time I'm backing it with Berkshire Hathaway's money."
I'd agree it's difficult to see the dollar doing anything but slipping further over the next year or more, and in the long run, a weaker dollar isn't good news for the U.S. economy or for U.S. consumers. A weaker dollar puts increasing pressure on the Federal Reserve to raise interest rates, because, as a debtor country, the U.S. has to continue to attract huge amounts of foreign capital. Consumers face higher prices for foreign imports, and besides taking a bite directly out of our wallets, rising prices for imports increase the odds that inflation will creep higher.But that's in general and in the long run. In particular and in the short run, investors can profit from a falling dollar -- and that's without speculating in currency futures or buying a truckload of gold. A few sectors of the economy will make unexpected gains over the next year or two from a falling dollar. By buying good old common stocks in these sectors, you can make a profit. The auto-supply sector is likely to be a prime beneficiary of a falling dollar. The stocks in this sector I believe should be on your radar include:
|7 Big Auto-Parts Makers to Consider
|BorgWarner (BWA)||Powertrains, transmissions|
|Dana (DCN)||Axles, drive shafts|
|Dura Automotive (DRRA)||Driver control systems|
|Lear (LEA)||Interior systems and components|
|Magna International (MGA)||Interior systems, including instrument and door panels|
|Superior Industries International (SUP)||Automotive wheels and suspensions|
|Tower Automotive (TWR)||Structural components, suspension systems|