Euro Meltdown: Here Are The 10 Companies That Stand to Benefit

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(List compiled by Eben Esterhuizen, CFA)

Can we expect a euro split, or total meltdown, anytime soon? According to several experts, for the currency and monetary union to survive some extraordinary actions must be taken – and fast.

Splitting the Euro

Analysts are of the opinion that the markets will no longer tolerate halfway measures that attempt to bridge the economically and structurally different European nations.

According to David marsh of MarketWatch, “a combination of a substantial currency undervaluation in creditor nations in the North and a deleterious overvaluation for the troubled Southern debtor states means the euro’s valuation is not right for anyone.”

Therefore, destabilizing European current-account imbalances will need to be eliminated, sooner or later, by splitting up the euro area into a creditor and a debtor group.

“The solution of splitting up the euro into weaker and stronger constituents has been put forward by many people over the past year or so, but has always been rejected as unworkable and unworldly. Now, realization seems to be drawing nearer — a conclusion of the grotesque turmoil in the international bond markets.”

His suggestion: The euro creditor group, mainly formed around Germany, would accept a trade-weighted appreciation of 20%. “This would be a constructive European contribution to alleviating one of the largest sources of global economic uncertainty.”

 

Investing Ideas

It seems increasingly possible the currency will turn towards a multi-tier platform.

So, which companies stand to benefit from a declining Euro currency?

For ideas, we went back in time, and collected price data on thousands of stocks. We identified the companies that performed best during times of Euro weakness.

The time intervals we used for our calculation (i.e. time intervals when the Euro declined):

7/14/2008 – 11/17/2008
11/23/2009 – 5/31/2010
4/25/2011 – 10/3/2011

All of the names mentioned below outperformed the market during these three time periods. Of course, past performance is no guarantee of future results, so only use this list as a starting point for your own analysis.

History suggests these companies do well in times of a raffling Euro currency. Do you think history will repeat itself?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

List sorted by the average alpha vs. the S&P 500 index.

1. Dollar Tree, Inc. (DLTR): Operates discount variety stores in the United States and Canada. Between 07/14/2008 and 11/17/2008: Price changed from $22.26 to $25.03, a price return of 12.44% (alpha of 43.18%). Between 11/23/2009 to 06/01/2010: Price changed from $32.73 to $41.13, a price return of 25.66% (alpha of 28.88%). Between 04/25/2011 and 10/03/2011: Price changed from $56.93 to $73.68, a price return of 29.42% (alpha of 47.1%). [Average Alpha: 39.72%]

2. Transcat Inc. (TRNS): Engages in the distribution of handheld test and measurement instruments, as well as provides calibration, repair, and weighing system services. Between 07/14/2008 and 11/17/2008: Price changed from $6.52 to $7.4, a price return of 13.5% (alpha of 44.23%). Between 11/23/2009 to 06/01/2010: Price changed from $5.66 to $7.25, a price return of 28.09% (alpha of 31.3%). Between 04/25/2011 and 10/03/2011: Price changed from $9.79 to $11.45, a price return of 16.96% (alpha of 34.63%). [Average Alpha: 36.72%]

3. Winmark Corp. (WINA): Operates as a franchisor of four retail store concepts that buy, sell, trade, and consign merchandise. Between 07/14/2008 and 11/17/2008: Price changed from $14.96 to $14.91, a price return of -0.33% (alpha of 30.4%). Between 11/23/2009 to 06/01/2010: Price changed from $21.79 to $30.93, a price return of 41.95% (alpha of 45.16%). Between 04/25/2011 and 10/03/2011: Price changed from $40.73 to $44.93, a price return of 10.31% (alpha of 27.99%). [Average Alpha: 34.52%]

4. Luminex Corporation (LMNX): Develops, manufactures, and sells proprietary biological testing technologies and products for the life sciences and diagnostic industries in the United States. Between 07/14/2008 and 11/17/2008: Price changed from $20.45 to $22.58, a price return of 10.42% (alpha of 41.15%). Between 11/23/2009 to 06/01/2010: Price changed from $13.91 to $17.08, a price return of 22.79% (alpha of 26%). Between 04/25/2011 and 10/03/2011: Price changed from $18.75 to $21, a price return of 12% (alpha of 29.68%). [Average Alpha: 32.28%]

5. O'Reilly Automotive Inc. (ORLY): Engages in the retail of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States. Between 07/14/2008 and 11/17/2008: Price changed from $22.75 to $23.19, a price return of 1.93% (alpha of 32.67%). Between 11/23/2009 to 06/01/2010: Price changed from $39.24 to $50.62, a price return of 29% (alpha of 32.21%). Between 04/25/2011 and 10/03/2011: Price changed from $58.07 to $64.97, a price return of 11.88% (alpha of 29.56%). [Average Alpha: 31.48%]

6. Hershey Co. (HSY): Engages in manufacturing, marketing, selling, and distributing various chocolate and confectionery products, pantry items, and gum and mint refreshment products worldwide. Between 07/14/2008 and 11/17/2008: Price changed from $30.81 to $31.37, a price return of 1.82% (alpha of 32.56%). Between 11/23/2009 to 06/01/2010: Price changed from $34.7 to $46.46, a price return of 33.89% (alpha of 37.1%). Between 04/25/2011 and 10/03/2011: Price changed from $55.94 to $58.32, a price return of 4.25% (alpha of 21.93%). [Average Alpha: 30.53%]

7. National Beverage Corp. (FIZZ): Develops, manufactures, markets, and distributes beverage products in the United States. Between 07/14/2008 and 11/17/2008: Price changed from $5.42 to $5.89, a price return of 8.67% (alpha of 39.41%). Between 11/23/2009 to 06/01/2010: Price changed from $8.37 to $9.97, a price return of 19.12% (alpha of 22.33%). Between 04/25/2011 and 10/03/2011: Price changed from $13.49 to $14.99, a price return of 11.12% (alpha of 28.8%). [Average Alpha: 30.18%]

8. DSW Inc. (DSW): Operates as a specialty branded footwear retailer in the U. Between 07/14/2008 and 11/17/2008: Price changed from $10.1 to $10.33, a price return of 2.28% (alpha of 33.01%). Between 11/23/2009 to 06/01/2010: Price changed from $19.61 to $26.18, a price return of 33.5% (alpha of 36.72%). Between 04/25/2011 and 10/03/2011: Price changed from $43.85 to $45, a price return of 2.62% (alpha of 20.3%). [Average Alpha: 30.01%]

9. Treehouse Foods, Inc. (THS): Operates as a food manufacturing company servicing primarily the retail grocery and foodservice distribution channels in the United States and Canada. Between 07/14/2008 and 11/17/2008: Price changed from $26.53 to $27, a price return of 1.77% (alpha of 32.51%). Between 11/23/2009 to 06/01/2010: Price changed from $36.03 to $46.15, a price return of 28.09% (alpha of 31.3%). Between 04/25/2011 and 10/03/2011: Price changed from $58.16 to $60.61, a price return of 4.21% (alpha of 21.89%). [Average Alpha: 28.57%]

10. Schiff Nutrition International Inc. (WNI): Develops, manufactures, markets, and distributes vitamins, nutritional supplements, and nutrition bars in the United States and internationally. Between 07/14/2008 and 11/17/2008: Price changed from $4.41 to $4.22, a price return of -4.31% (alpha of 26.43%). Between 11/23/2009 to 06/01/2010: Price changed from $5.3 to $6.33, a price return of 19.43% (alpha of 22.65%). Between 04/25/2011 and 10/03/2011: Price changed from $9.39 to $11, a price return of 17.15% (alpha of 34.82%). [Average Alpha: 27.97%] 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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