The weak dollar has generated plenty of political debate, as well as some economic disagreement about whether it is good or bad.
Motley Fool Global Gains lead advisor Bill Mann points out that the weak dollar makes U.S. goods cheaper for foreign buyers, giving a lift to a variety of companies, from eBay
Of course they are both right, to some extent. According to the U.S. Census Bureau, "Total March exports of $148.5 billion and imports of $206.7 billion resulted in a goods and services deficit of $58.2 billion, down from $61.7 billion in February, revised." Econoday had pegged the consensus estimate at a $60.8 billion deficit. So, while we remain net losers today, we are catching up.
I want investment ideas
More important for me as an investor, though, is to figure out the best way to profit from the theme. Luckily, the Census Bureau report can help me do that. In a supplemental table, the report shows how broad categories of goods are affecting the total balance of trade.
The area that immediately jumps out to me is "food, feeds and beverages." In the first three months of 2007 we exported $18 billion worth of food and imported $20 billion -- a $2 billion deficit. For the same period in 2008 we exported $27 billion and imported $21 -- a $6 billion surplus.
The next step is to find out which companies are the biggest beneficiaries of that shift in trade imbalance.
Another table points specifically to "food and live animals." I was surprised to find that the trade balance for beverages and tobacco actually worsened in March, ruling out companies including Coca-Cola
Room to run
Furthermore, I'm nervous. So many of the agriculture plays have already had large gains. With this in mind, I used Zack's Research Wizard to run a screen for food companies with increasing earnings estimates and moderate 12-month returns. I found three that could be worth further investigation.
Corn Products International
Ketchup king H.J. Heinz
Last but not least, there's Tyson Foods
Unfortunately, export sales of $2.7 billion were just 10% of total revenue. However, that could be changing. When the latest quarterly earnings were reported, the company said, "Our chicken and pork exports continue to be strong, and we are moving forward with our strategy for international expansion."
I hope you can see why I like to leave the political arguments to others. I'm too busy skimming through the data to find good stock ideas!