Right now, the US dollar is rapidly appreciating against other currencies. International investors are moving to the dollar as a safe-haven, which is weakening other currencies. That also makes US exports more expensive on a relative basis, which tends to be bad news for multinational companies headquartered in the United States.
However, not all trends last forever. And those who get into the trend at the right time can make big profits when the trend shifts.
That’s particularly true when investing in multinational companies that offer a product or service with low production costs and a high profit margin. A few tech names fit the bill. The most attractive is Alphabet (GOOG).
The parent company of Google is a global dominator for search engine results. And while shares have lost 27 percent over the past year, revenue has continued higher with a 13 percent rise, even with the headwind of a strong dollar. Plus, the company has a 26 percent profit margin, which can expand with new projects and offerings in the years to come.
Action to take: Investors may want to start buying shares here. A weakening dollar in the future should provide a tailwind to shares, but they’re already at a relative bargain at 16 times forward earnings compared to 33 times a year ago. At present, the company does not pay a dividend.
For traders, the March $120 calls, last going for about $3.75, can deliver mid-double-digit gains on a move higher in shares. In today’s market, traders should buy on a down day and look to take partial profits on any day with a big rally for shares.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.