Believe it or not, there is a silver lining to the dysfunctional politics occurring in our nation’s capital right now.
While our elected leaders embarrass the U.S. on the world stage, the U.S. dollar has been on a slippery slope. And that’s great news for two parties: multinational companies, and those who invest in multinational companies.
For the first half of 2013, the U.S. dollar steadily gained ground against many of the world’s major currencies. This weighed on the margins of multinational companies that paid their bills in U.S. dollars but received sales in global currencies.
But now the tables have turned.
Global confidence in the U.S. dollar is once again eroding because of the fiscal irresponsibility of our elected leaders and the fact that the Federal Reserve is about to pass into the hands of another dove — current vice chair Janet Yellen.
The weaker U.S. dollar should boost the corporate profits of these companies, making them appear very attractive looking ahead to the fourth quarter and beyond. So if you’re looking for more conservative ways to invest abroad, I’d start with companies that have their operations around the world and get paid in a variety of currencies.
One such company is Actavis (ACT), one of the world’s largest generic drugmakers. With a portfolio of more than 750 pharmaceutical products, Actavis has its name on everything from antibiotics to contraceptives to smoking-cessation treatments. ACT operates in more than 60 countries and out-licenses generic products in more than 100 countries, so it is a direct beneficiary of the falling dollar.
What really caught my eye about Actavis is its work on biosimilars — generic versions of biologic drugs. Biologic drugs are at the cutting edge of modern medicine, so many treatments run at tens of thousands of dollars. Generic biosimilars are potentially cheaper, and to date they’re not available in the U.S. Thus, right now there is a race between biotechs to develop and get their biosimilars approved. Considering that the global market for biosimilars is forecast to be between $10 billion to $20 billion by 2020, this is a lucrative opportunity.
Actavis is based in Dublin, Ireland. For the better part of the past three decades, Actavis (formerly known as Watson Pharmaceuticals) was headquartered in the United States. But just a few months ago, the company acquired Warner Chilcott and took advantage of the $8.5 billion deal to make the leap across the pond.
With Warner Chilcott now under the Actavis umbrella, the company has increased expertise in gastroenterology and dermatology. And now that the company is based in the U.K., Actavis will pay lower taxes. In fact, management estimates that the deal will add a sizable 30% to earnings per share in 2014.
The new Actavis Plc is a company that dominates the global market for generic drugs — taking in $11 billion in annual sales — and enjoys tremendous tax savings by being based in Ireland.
Actavis is a prime example of the kind of multinational company you should have your eye on.
Louis Navellier is the editor of Blue Chip Growth. As of this writing, ACT was on the Blue Chip Growth buy list.