It is a tough time for investors, with conflicting signals coming from the markets and much of the economic commentary as to the outlook for 2015. But put simply, the markets are not as bearish as much of the talk.

The twin themes of a slowing Chinese economy but a strengthening, domestically driven, US economy in 2015 – and a resurgent greenback reflecting this – both show up in a falling Australian dollar. It is highly likely that the Aussie dollar will have a 7 in front of it at some stage next year. Not only will the automatic stabiliser of a lower currency help the Australian economy, it will boost the earnings of the group of stocks exposed to the US dollar.

Prime among these are Australia’s big global stocks, with large proportions of their revenue coming from overseas – in particular, the stocks that actually report their financial results in US dollars.

The winners

In this group are the big miners BHP Billiton (BHP), Rio Tinto (RIO) and Fortescue Metals Group (FMG), oil and gas companies Woodside Petroleum (WPL) and Oil Search (OSH), blood plasma products company CSL (CSL), QBE Insurance (QBE), respiratory device maker ResMed (RMD), hearing device maker Cochlear (COH), gaming machines group Aristocrat Leisure (ALL), building products maker James Hardie (JHX), packaging group Amcor (AMC), share market registry operator Computershare (CPU), metals and electronics recycler Sims Metals Management (SGM), container and pallet pooling solutions provider Brambles (BXB), media group News Corporation (NWS) and entertainment company 21st Century Fox (FOX).

Then there are the companies that report in Aussie dollars but have large proportions of their revenue and profit coming from overseas, for example, professional financial services software providers Iress (IRE) and GBST Holdings Limited (GBT), property group Westfield (WDC), healthcare group Sonic Healthcare (SHL), fund manager Henderson Group (HGG), education services business Navitas (NVT), dairy business Bega Cheese (BGA), toll road developer and operator Macquarie Atlas Roads (MQA), biotech Sirtex Medical (SRX), global hospital group Ramsay Health Care (RHC), explosives and fertiliser group Incitec Pivot (IPL) and chemicals/explosives supplier Orica.

Investors in these businesses can’t rely on currency changes alone to boost profitability: the business needs to be doing well, too. But generally a weaker Aussie dollar will be a tailwind for these companies.

This effect is most notable in the big iron ore miners, where the weaker Aussie dollar is occurring on the back of the slowing China growth story. Iron ore has been hammered in price to levels in the US$70 a tonne range, down 45% in 2014 alone. But it is the big miners that have the scale and low costs to absorb lower iron ore prices while still operating profitably.

The big winners

Using the analysts’ consensus expectations collated by FN Arena, let’s look at what the market sees as the prospects for our most US dollar-exposed stocks.

• Woodside Petroleum (WPL): consensus target price $40.48 – 4.2% above current share price.
• Oil Search (OSH): consensus target price $9.79 – 14% above current share price.
• CSL (CSL): consensus target price $78.32 – 0.4% below current share price.
• QBE Insurance (QBE): consensus target price $12.26 – 12.8% above current share price.
• ResMed (RMD): consensus target price $6.52 – 8.3% above current share price.
• Cochlear (COH): consensus target price $58.84 – 15.3% below current share price.
• Aristocrat Leisure (ALL): consensus target price $7.13 – 6.2% above current share price.
• James Hardie (JHX): consensus target price $13.93 – 14.2% above current share price.
• Amcor (AMC): consensus target price $11.53 – 3.2% below current share price.
• Computershare (CPU): consensus target price $12.25 – 8.5% above current share price.
• Sims Metal Management (SGM): consensus target price $12.17 – 18.4% above current share price.
• Brambles (BXB): consensus target price $10.06 – 3.1% above current share price.
• News Corporation (NWS): consensus target price $21.84 – 26.6% above current share price.
• 21st Century Fox (FOX): consensus target price $41.12 – 18.6% above current share price (Thomson Reuters consensus target price).
• Iress (IRE): consensus target price $9.73 – 2.4% below current share price.
• GBST Holdings (GBT): consensus target price $4.55 – 13.6% above current share price (Thomson Reuters consensus target price).
• Westfield (WDC): consensus target price $10.77 – 0.7% below current share price. (Thomson Reuters consensus target price).
• Sonic Healthcare (SHL): consensus target price $18.53 – 7.4% above current share price.
• Henderson Group (HGG): consensus target price $4.31 – 9.1% above current share price.
• Navitas (NVT): consensus target price $5.36 – 4.9% above current share price.
• Bega Cheese (BGA): consensus target price $5.05 – 4.3% below current share price (Thomson Reuters consensus target price).
• Macquarie Atlas Roads (MQA): consensus target price $3.30 – 7% above current share price (Thomson Reuters consensus target price).
• Sirtex Medical (SRX): consensus target price $17.51 – 32.9% below current share price.
• Ramsay Health Care (RHC): consensus target price $50.52 – 3.5% below current share price.
• Incitec Pivot (IPL): consensus target price $3.17 – 10.1% above current share price.
• Orica (ORI): consensus target price $20.40 – 10.9% above current share price.

Shopping daze

A more domestically oriented positive theme is the expected pick-up in Australian discretionary spending in 2015, on the back of improved consumer sentiment and the  “wealth effect” of higher superannuation balances and house prices. Even with likely rising interest rates – coming off record-low levels – Australian households are cashed-up and ready to spend.

The most likely beneficiaries are retailers like JB Hi-Fi (JBH), Super Retail Group (SUL) – owner of the Supercheap Auto, Rebel Sport, Boating Camping Fishing (BCF), Ray’s Outdoors and Workout World store chains – Dick Smith Holdings (DSH), The Reject Shop (TRS) and Oroton (ORL).

To get an idea of the potential value the market sees in this sector, compare the analysts’ consensus target price expectations to current share prices:

• JB Hi-Fi (JBH): consensus target price $17.89 – 15.1% above current share price.
• Super Retail (SUL): consensus target price $9.42 – 23.6% above current share price.
• Dick Smith Holdings (DSH): consensus target price $2.52 – 14.4% above current share price.
• The Reject Shop (TRS): consensus target price $8.30 – 9.9% above current share price.
• Oroton (ORL): consensus target price $5.06 – 29.3% above current share price.

As always, the sharemarket environment heading into 2015 is far from certain, but there seems quite a bit of value to be had in preparing for a low-Aussie dollar, improved domestic spending environment.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

Also in the Switzer Super Report:

• Paul Rickard – Investing for your kids or grandchildren – Part 1
• Peter Switzer – Ignore the positive vibes at your peril
• Rudi Filapek-Vandyck – Buy, sell, hold – what the brokers say
• Penny Pryor – Shortlisted – Medibank, Woolworths and ANZ
• Staff Reporter – Auction numbers hit high – Brisbane shines