Thursday, September 27, 2007

 

What to buy on a dollar rebound

Well, we all have our own strategies. If there is one thing worth banking on, it is the reversal of the current decline in the U.S. dollar, eventually, despite what you fucking gold bugs proclaim. I'm just using history as my guide. Don't fuck with me.

Anyway, one of the casualties of the plummeting dollar has been Indian outsource companies. Oh the irony.

Basically, the Indian rupee has gained 9% versus the U.S dollar, year to date, essentially raping the outsourcing companies of their gross profit margins. Currently, the rupee is at a 9 year high versus the dollar.

The companies most impacted are CTSH, INFY, SAY and WIT.

With regards to CTSH, for every 1% move up in the rupee, the company loses 0.5% in gross margins. INFY has some hedges in place, and only lose 0.2% for every 1% move up in the rupee.

In short, the underlying businesses are operating flawlessly. Should the dollar strengthen, expect a surge in the above names. Naturally, should the dollar continue to get kicked in the nuts, you might want to avoid these names, especially when they are due to report earnings.

Comments:
More from Bank of America's downgrade of SBUX:

Starbucks Down Following Downgrade

Starbucks Corp. (SBUX) fell 2.3% to $27.05 after Banc of America Securities cut its rating on the Seattle coffee retailer to sell from neutral, saying it sees slower growth.

The broker told clients the company faces a flurry of operating challenges including slower same-store sales growth, margin pressures, increased competition and weaker consumer spending.
The shares fell even after the company and PepsiCo Inc. (PEP) said they are expanding their relationship beyond North America, making Starbucks ready-to-drink coffee beverages available in China.
 
Good post Fly, thanks for the heads up.
 
Fry, dorrar doomed. Buy gord.

(Over $740 as we type)
 
Oh, an' sirvah, too. Rots of sirvah.

(SLW, SLV)
 
Ruh roh.

Razalus just went gleen.
 
Jake, you're the Rich Little of the blogosphere- you can do Chinese,Italian,Indian,Yiddish,German,Japanese.
Funny.

Fuck the Mets for taking Beltran

Also Fuck the Yankees for Life.
Fuck Chris Chambliss
Fuck Goose Gossage
Fuck Greg Nettles
Fuck Willie Randlolph
And Go ahead and fuck George Posada while your at it.
 
What, you leave Bucky Dent out??

You must be an Orioles fan, then?
 
Did anyone pick up some GG at $29, yesterday, btw?
 
Anyone think that the USD will bounce soon? Not sure how much we import from Europe, but with a weaker dollar, it'd cost more for us to buy from them. If enough countries are affected, wouldn't they want to lower their rates to avoid a "slowdown" in their countries?
 
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