Some FTSE 100 stocks have seen millions, if not billions, wiped off their value since Liz Truss came to office. Despite preparing myself, my portfolio has been hit too. But with the index down, I’m looking to take this opportunity to improve my portfolio, particularly in light of recent developments.
With the pound now at its weakest point against the dollar in decades, I’m buying firms that could benefit from this currency depreciation. After all, the pound has depreciated 20% against the dollar over the past six months.
So, if a FTSE 100 company made half of its revenue from dollar sales, the 20% depreciation of the pound would lead to a 10% increase in total revenue when converted back into GDP — assuming sales remained constant throughout the period.
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So, here are three stocks that I’m buying as the pound crashes.
Unilever
Unilever (LSE:ULVR) is a fast-moving consumer goods company based in London. The firm sells in 190 countries and claims that 3.4bn people use its products every day. It also earns 58% of its income in emerging markets.
Approximately 17% of the company’s revenue comes from the US. This segment of the business’s income should be considerably inflated in the coming months when converted back into GBP. But this is also the case for other developed markets — the pound is the worst-performing currency in the G7.
I do have concerns about costs increasing as a result of the pound depreciating, but I’m still backing the firm to outperform over the next year.
I also like Unilever because of its pricing power and defensive qualities. It owns many household brands such as Hellmann’s, Marmite, Heinz, Persil, and Lifebuoy. The latter is a soap brand that only appears to be sold in developing nations. And well-known brands tend to do better when economies go into reverse.
Diageo
Diageo (LSE:DGE) only generates a small proportion of its revenue from the UK. The London-based company owns 200 brands and sells in more than 180 countries. The firm claims that its portfolio offers something for every taste and celebration.
Over the past year, the drinks maker made approximately twice as much income in North American markets, where currencies have stayed strong, than in Europe, where the pound and euro have weakened considerably.
And at the beginning of the year, Diageo contended a strong pound had negatively impacted earnings. But now, with the pound at $1.07, it’s going to have a positive impact on earnings.
Diageo also has defensive qualities, selling brands like Johnnie Walker, Guinness, Baileys, and Smirnoff. A drawn-out recession probably won’t be good for alcohol consumption, but I’d still expect the firm to do well over the next year.
Haleon
Haleon (LSE:HLN) was formed after a demerger with GSK earlier this year. The new consumer goods company serves more than 100 markets worldwide. And, according to the company itself, it has an established presence in “all key channels“. So with the pound depreciating, Haleon should see its GBP income appreciate accordingly.
Haleon owns brands like Sensodyne, Advil, and Voltaren, all of which are household names, giving it defensive qualities. The share price is also depressed right now because of a US lawsuit, although I gather the company doesn’t anticipate be made liable should GSK lose.
