What US shares could do in weakening dollar environment

Cape Town - The US dollar has been very strong since mid-2014, but some policy and political uncertainty might cause the dollar to weaken a bit.

Given that European economies are seemingly turning the corner, the dollar might have some weakness ahead. This week's share watch places focus on five US shares and how they might possibly react during dollar weakness.

Wells Fargo

Wells Fargo is an American and International bank headquartered in San Francisco. Wells Fargo delivers around $21bn net income per annum. The interest rate normalisation cycle in the United States, should be positive for Wells Fargo earnings. Growing the loan book to $967.7, Wells Fargo will benefit from the increasing rates.

The weakening dollar has meant that the Wells Fargo share price has pulled back a bit. Early in 2017 Wells Fargo was trading at $58 per share. Currently it is trading at $52 per share.

Johnson & Johnson

Johnson & Johnson is one of the most recognised brands in the world. This American -born multinational was founded in 1886 and produces medical devices, pharmaceutical and consumer goods. In 2016, the company had an annual turnover of $72bn. About $38bn of those sales were in the US and $34bn outside of the US.

Johnson & Johnson has seen its share price surge since late 2015. In September 2015, Johnson & Johnson was trading at $91 per share. Today it is trading at $127 per share. With about half of Johnson & Johnson's revenue being generated outside the US, the weakening dollar will have a minimal impact on the company’s top line.

Exxon Mobil

Exxon Mobil is the world’s largest publicly traded oil company. Exxon Mobil's upstream division is the largest contributor to revenue, contributing around 70% of total revenue.  Downstream production and chemicals make up the rest of the revenue.

Shareholders in Exxon Mobil have had a hard time since the middle of 2014. June 2014 saw Exxon Mobil's share price at $103 per share. It is currently trading at around $80 per share. The low oil prices are likely to continue for a while so Exxon Mobil will use various hedging strategies. The weakening dollar will add much needed support for the oil price.


Amazon is the world’s largest internet based retailer by total sales. The company started as an online book retailer in 1994 and has grown since to become one of the most well-known online retailers worldwide.

The company has also ventured into hardware production like tablets and smart TVs. Amazon has seen its share price increase from $290 in January 2015 to $968 to date. This is an increase of 345% in just over two years.

Currently Amazon is trading on a price earnings ratio of over a 100. Like Tencent in China (Naspers in South Africa), Amazon's earnings need to grow very aggressively to justify the share price.

JP Morgan Chase

JP Morgan Chase was formed in 2000, with the merger of Chase Manhattan Corporation and JP Morgan & Co. It is one of the biggest financial services firms in the US. The company is operating across 60 countries and has assets of $2.5trn. Last year has been an excellent year for JP Morgan Chase shareholders with a one year return of 36%.

Companies like JP Morgan Chase are very sensitive to currency movements and policy uncertainty. The recent weakening dollar has led to a slight pullback in the share price. The share pulled back from $93 in March to $84 today.

Do you agree with Kirk's stock picks? Send us yours and tell us why.

*Kirk Swart is an analyst at Overberg Asset Management, an Authorised Financial Services Provider (No 783) which specialises in the private management of local and global discretionary portfolios as well as pension products.

Disclaimer: The above article does not constitute financial advice and is not a recommendation. Investors must always seek the advice of professionals and trade with caution. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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