Home Investing Buy ‘international equities’ to capitalise on strong U.S. dollar: Pro

Buy ‘international equities’ to capitalise on strong U.S. dollar: Pro


Buy ‘international equities’ to capitalise on strong U.S. dollar: Pro


Wajeeh Khan

Sep 27, 2022

U.S. dollar index climbed to a twenty-year high of 114 today.

David Herro says now is the time to own international equities.

Names he likes include Phillips NV, Adidas AG, and Kering SA.

Investors should look for opportunities in international equities as the dollar continues to gain and retain strength, says David Herro – the Vice President of Oakmark Funds.  

U.S. dollar index hits a forty-year high

“DXY” at a twenty-year high of 114 on Tuesday is largely a bane for the home companies. But for ones based out of the United States, he noted, it’s a very different story.

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U.S. companies are moaning the strength of the dollar is clobbering them but the reverse is true if you’re especially a European or maybe even a Japanese company. Exposure to dollar-based revenue and profit will get you a big currency uplift.

A name he particularly likes is Koninklijke Phillips NV (AMS: PHIA) that he (Oakmark International Fund) bought roughly 7.6 million shares of in the second quarter of 2022. The stock is currently down 50% for the year.

More reasons to consider international equities

Herro is particularly constructive on international equities because strength of the U.S. dollar is yet to reflect in what these stocks are worth in their local currencies. This morning on CNBC’s “Squawk on the Street”, he said:

Normally, currency devaluation has a positive impact on local market share prices. We haven’t seen that yet. It’s one of the reasons why there is such opportunity in overseas shares as you’re buying them via very undervalued currencies.

Two more names he likes and has recently bought are Adidas AG (ETR: ADS) and Kering SA (EPA: KER). Wall Street has a consensus “overweight” rating on both.

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