The weak loonie has impacted a variety of businesses. Not only has it punished companies that need to import from abroad (forcing them to pay a higher price for the same goods), but it may lead to a reduction in consumer spending as consumers feel relatively poorer due to a decrease in spending power. Some companies, however, are thriving.
Nearly every exporter is feeling a boost. These companies can produce cheaply inside Canada, making their products more attractive to foreign buyers with strong currencies. Even better than exporting, however, is making your money in foreign currencies to begin with. The following two companies, while listed in Canada, actually generate most of their profits in U.S. dollars–a significant advantage in today’s market.
Performance regardless of the market
Historically, the stock of Winnipeg-based New Flyer Industries (TSX:NFI) has shown to be very uncorrelated to the Canadian stock market. Since 2012 shares are up over 360% versus a paltry 6% return for the TSX overall. With the market dropping around 5% in 2015, New Flyer stock was up 110%. What’s driven this consistent outperformance?
New Flyer is the leading manufacturer of heavy-duty transit buses in the United States and Canada, carving out a niche in renewable technologies with products like electric-powered buses. The company is also heavily involved in aftermarket parts, which are typically higher margin than manufacturing sales. In recent years the U.S. has been a major factor in accelerating sales.
With a weakening loonie, it’s been an advantage to have a major presence in the U.S.; demand for clean public transit vehicles in the U.S. is being driven by government subsidies. In the past 12 months the company sold 2,197 units in the U.S. compared to just 274 in Canada. Currently, around 90% of sales are to the U.S., which are denominated in U.S. dollars, not Canadian. If the loonie continues to fall, New Flyer should experience nothing but benefits.
Another outperformer
With big annual gains every year since 2006, Boyd Group Income Fund (TSX:BYD.UN) is another company that’s seemingly impervious to current market volatility. Also based in Winnipeg, Boyd actually derives 90% of its sales from the U.S. It has 306 locations across 19 U.S. states, with only 38 in Canada. Not only does it operate one of the largest networks of collision repair shops in North America, but it’s actually the only public company that does so.
While earning most of its money in U.S. dollars has helped boost profits, there’s plenty else to like about the company. As one of the continent’s biggest players, it has an opportunity to roll-up what is otherwise a very fragmented market.
The North American collision repair market is estimated to be worth roughly $35 billion with over 33,500 participants. Over 75% of that market is run by independents that are incapable of generating the massive cost savings that Boyd’s extensive supply chain and buying power can.
Since 2010 the company has acquired or opened 273 locations, helping fuel double-digit-sales growth rates. The fragmented nature of the market means there is plenty of room left to grow. Plus, if the loonie remains weak Boyd shares are likely to continue outperforming its domestic counterparts.
