A Trip Around the World With the S&P 500

The U.S. stock market, as measured by the S&P 500 index, is having a good year so far. But tracking the gains in currencies other than the U.S. dollar gives you different returns.

Swedish and eurozone investors holding U.S. stocks are looking at losses in their home currencies. British and Brazilian investors' U.S. holdings only returned a small fraction of the gains seen by U.S. investors. The U.S. dollar is weaker against nearly every major currency on the planet so far this year. The table below shows how the S&P 500 has performed so far this year in U.S. terms along with several other currencies. Of these currencies, only the Japanese yen has lost ground to the U.S. dollar.

S&P 500 Return Measured in:

 

U.S. $

6.34%

Euro

(2.45%)

British pound

0.52%

Canadian $

1.41%

Australian $

1.75%

Chinese yuan

5.15%

Brazilian real

0.42%

Japanese yen

7.83%

Swiss franc

1.11%

Swedish krona

(3.28%)

Indian rupee

5.00%

Source: S&P 500 returns, Yahoo! Finance, www.oanda.com, author's calculations.

Most pundits mention a struggling economy, record deficit spending, and easy monetary policy as the main reasons for U.S. dollar weakness, and the dollar is likely to continue getting weaker until some of those factors change. Investors who want to hedge against, or profit from, a weaker dollar have a number of options including owning foreign currencies, holding non-U.S. stocks, or owning commodities.

Investors can also stick close to home and still get overseas exposure with U.S.-based companies that generate a big chunk of revenue from outside the United States. As the dollar gets weaker, the revenue and profit generated in other countries get more valuable in dollar terms. I sifted through some annual reports and found a diversified group of U.S. companies rated four or five stars (out of five) in our CAPS system with less than half their revenue from the U.S.

Company

Industry

CAPS rating

U.S. Revenue

Philip Morris International (NYSE: PM  )

Tobacco

*****

0%

Intel (Nasdaq: INTC  )

Semiconductors and semiconductor equipment

****

15.0%

National Oilwell Varco (NYSE: NOV  )

Energy equipment and services

*****

33.8%

Procter & Gamble (NYSE: PG  )

Household products

****

38.0%

United Technologies (NYSE: UTX  )

Aerospace and defense

****

39.0%

Abbott Laboratories (NYSE: ABT  )

Pharmaceuticals

*****

43.2%

Yum! Brands (NYSE: YUM  )

Hotels, restaurants, and leisure

****

47.4%

Source: Most recent annual reports.

Right now, currency exchange is a tailwind for U.S. companies with overseas operations. When the dollar turns around and starts to strengthen, that tailwind will turn into a headwind. In the meantime, enjoy the ride.

You can follow any of the stocks mentioned using our free watchlist service, My Watchlist.

Fool contributor Russ Krull has no financial position in any of the companies mentioned in this article. The Fool has a disclosure policy that adds value in any currency.


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