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Goldman says hide out in these stocks as dollar strength hits big international shares


Investors should hide out in companies that make most of their money domestically, as a strong dollar hurts multinational companies, according to Goldman Sachs. “Earnings results and euro/dollar parity have turned the focus of our recent investor conversations to the impact of US dollar strength on equities,” David Kostin, Goldman’s head of U.S. equity strategy, said in a note. Concerns over global growth sent the safe-haven dollar climbing this year. The dollar index , which tracks the greenback against six major currencies, hit a multiyear high earlier this month. The greenback also reached multidecade highs against currencies like the euro and the yen . Some high profile companies have already warned of a profit hit by the rising dollar. Microsoft said in June that its fiscal fourth-quarter revenues and earnings would be impacted by foreign exchange. IBM and Johnson & Johnson issued similar warnings as well. “Recent dollar strength will likely lead to a high frequency of revenue misses this quarter,” Kostin said. “Periods of dollar strength have historically coincided with disappointing sales results from S & P 500 companies.” The strategists said companies with a focus on domestic sales have already been outperforming those relying on international sales. Goldman’s sector-neutral basket of S & P 500 companies with the highest domestic sales exposure has outpaced a comparable basket of foreign-facing stocks by 11 percentage points year to date. Goldman listed a number of stocks with zero percent foreign sales, including telecom giants Charter Communications and Verizon . A number of domestically-oriented names also made Goldman’s list, such as Dollar General , Chipotle Mexican Grill , Target, Altria Group and Kroger. “Looking forward, GS economic and FX forecasts imply US stocks with high Europe sales will continue to underperform,” Kostin said. “GS economic forecasts also suggest a challenging outlook for US stocks with high China revenue exposure.” — CNBC’s Michael Bloom contributed reporting.

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