3 Companies to Buy as the Loonie Plummets

As the Canadian dollar tanks, you should turn to companies like Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF), CAE Inc. (TSX:CAE)(NYSE:CAE), and Magna International Inc. (TSX:MG)(NYSE:MGA).

| More on:

When Bank of Canada governor Stephen Poloz announced a surprise interest rate cut last week, he called the oil price slump “unambiguously negative” for the Canadian economy.

And while the oil slump has its downsides, Mr. Poloz’s words were a bit strong. After all, the low oil price is good for oil-importing provinces like Ontario and Quebec, which together account for 60% of the Canadian economy.

More crucially, low oil prices have crushed the Canadian dollar, which is now worth barely US$0.80. Let’s take a look at three beneficiaries of the weak Canadian dollar that should at least be on your watch screen.

1. Sun Life Financial

Since late November, when the oil price and Canadian dollar really went into freefall, Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) shares have fallen flat as well. But investors seem to be missing a very important fact: Sun Life should receive a nice windfall from the low Canadian dollar.

The company generates nearly half of its net income from the United States, but reports all of its income in Canadian dollars. So with the U.S. dollar becoming so much more valuable, Sun Life gets a boost to income without doing anything differently.

2. CAE

Flight simulation specialist CAE Inc. (TSX:CAE)(NYSE:CAE) should benefit a lot more than Sun Life. One reason is that CAE is much more global — in the most recent quarter, Canada accounted for only 7% of revenue, while the United States accounted for over a third.

As a bonus, lower oil prices are a boon for the airline industry. Consequently, airline companies are sure to purchase plenty of aircraft and train plenty of pilots. This makes CAE’s outlook all the more promising.

3. Magna International

Auto parts manufacturer Magna International Inc. (TSX:MG)(NYSE:MGA) should benefit even more than CAE. The company does not break down revenue by country, but surely generates far more revenue in the United States than in Canada. Better yet, Magna has a big manufacturing presence in Canada (the company has almost as many employees in Canada as it does in the U.S.).

In other words, Magna is now paying employees with cheap Canadian dollars, while selling its products for valuable U.S. dollars.

And the story gets even better. Thanks to low oil prices, there’s a great outlook for auto sales. Even larger vehicles, which don’t come with great mileage, should sell well. And Magna specializes in parts for larger vehicles.

So remember Mr. Poloz, the news isn’t all bad. And as an investor, these are companies you should be paying attention to.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Investing

Investing

2 Great REITs That Won’t Stay Cheap Forever

First Capital REIT (TSX:FCR.UN) and Automotive Properties REIT (TSX:APR.UN) are cheap real estate plays for yield-seeking Canadian investors.

Read more »

shopping online, e-commerce
Tech Stocks

Young Investors: Shopify (TSX:SHOP) Stock May Finally Be Worth Buying

Shopify (TSX:SHOP)(NYSE:SHOP) stock is attempting to stage a bottom, but should investors be buyers amid the market chaos?

Read more »

stock analysis
Investing

3 Ideal Stocks for Your Short-Term TFSA Growth Goals

Depending on what your short-term growth goals are, you can choose from the diverse pool of growth stocks, including linear…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Investing

1 of the Cheapest REITs in Canada Looks Poised to Soar

H&R REIT (TSX:HR.UN) has become way too cheap to ignore for passive-income seekers who want a great deal from the…

Read more »

Early retirement handwritten in a note
Investing

TFSA Investors: 3 Top TSX Stocks to Buy Now for Early Retirement

Plan an early retirement by maximizing your TFSA and investing in solid stocks like CN Rail (TSX:CNR)(NYSE:CNI) for growth.

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Tech Stocks

How to Easily Turn a $25,000 RRSP Into $250,000

You can hold quality growth stocks such as Shopify in your RRSP and benefit from market-beating gains in the long…

Read more »

Retirement plan
Dividend Stocks

3 Retirement Stocks to Buy in Your 20s

A retirement stock is not necessarily something you buy when you retire. It also includes a broad spectrum of stocks…

Read more »

Technology
Dividend Stocks

Dividend Earners: Stay Invested in 2 Low-Volatility Stocks

Dividend earners can stay invested, despite the extreme market volatility provided they shift to two low-volatility stocks.

Read more »