U.S. Dollar Hits 2-Month High: 5 Top Picks

The U.S. dollar reached its best levels on Oct 24 in around two months, after key European currencies stumbled following renewed Brexit-related tensions and disappointing economic data A stronger dollar bodes well for companies that are domestically focused.

In this context, companies that have firm exposure in the domestic market could be a profitable proposition at this time. Although, markets are plummeting, economic data has been mostly favorable. For investors with a high risk appetite and return expectations, domestic stocks are the best bets given the current scenario.

Eurozone PMI Touch Its Lowest Level In 25 Months

The ongoing global trade war weighed on the growth performance of the private sector of the Eurozone. According to IHS Markit, the flash eurozone composite PMI figure came in at 52.7 in October, lower than the preceding month’s reading of 54.1. The composite PMI touched its lowest level in 25 months, after the bloc’s manufacturing PMI of 52.1 hit a 26-month low and services PMI of 53.3 touched a 24-month low.

Daniel Katzive, head of FX strategy for North America, BNP Paribas said that the eurozone PMI reports “came in weaker than expected” and highlighted “that some of the softness” in the second and third quarter for the bloc “may not be as temporary” as expected. Although, the United States has shown some level of vulnerability in last few trading days, Europe is in more troubled waters.

Apprehensions Over Post-Brexit Deal Remain

Additionally, United Kingdom’s Theresa May administration received criticism after the government failed to clinch a deal in the last week’s European Union (EU) summit in Brussels. Increasing possibility of the U.K. remaining under the EU governance as long as end of 2021, weighed on sentiment. Renewed Brexit related worries and record low PMI weighed on the euro and British pound. The euro fell 0.7% to $1.14 and the British pound declined 0.8% to $1.29.

Following these developments, the ICE Dollar Index (DXY) which compares the greenback with six other currencies was at $96.30 on October 24, its highest settlement since end of August. A strong greenback is expected to weigh on companies that generate their revenues from export-oriented business.

On the contrary, companies which have significant exposure in the domestic market and have little or no exposure to the global markets are expected to grab eyeballs. In this context, domestic stocks are expected to get investor attention.

5 Potential Domestic Stocks

Given this encouraging backdrop, domestic stocks, which are believed to have a stronger linkage with the U.S. economy, provide an excellent investment avenue. Our selection is based on a Zacks Rank #1 (Strong Buy) or 2 (Buy) and other relevant metrics. You can see the complete list of today's Zacks #1 Rank stocks here.

Tilly's, Inc. TLYS is a retailer of casual apparel, footwear, and accessories for young people and children. At present, this company operates 222 total stores, including three RSQ pop-up stores, across 31 different states.

This California-based company has a Zacks Rank #1. The company has expected earnings growth of 37.95% for the current year. The Zacks Consensus Estimate for the current year has improved 11.1% over the past 60 days.

MCBC Holdings, Inc. MCFT is a designer, manufacturer and marketer of sport boats and outboard boats in North America. The company markets its boats under the MasterCraft and NauticStar brands in the United States.

This Tennessee-based company has a Zacks Rank #1. The company has expected earnings growth of 26.40% for the current year. The Zacks Consensus Estimate for the current year has improved 15.8% over the past 60 days.

Malibu Boats, Inc. MBUU is a designer, manufacturer, distributor, marketer and seller of recreational powerboats. The company has three manufacturing facilities, with two of it in the United States, Merced, California and Loudon, Tennessee.

This Tennessee-based company has a Zacks Rank #1. The company has expected earnings growth of 24.31% for the current year. The Zacks Consensus Estimate for the current year has improved 9.9% over the past 60 days.

NCI Building Systems, Inc. NCS is a designer, engineer, manufacturer and marketer of metal products for the nonresidential construction industry in North America. The company has 40 manufacturing facilities in the United States, Canada and Mexico, with majority of it in the States.

This Texas-based company has a Zacks Rank #2. The company has expected earnings growth of 81.66% for the current year. The Zacks Consensus Estimate for the current year has improved 2.1% over the past 60 days.

RadNet, Inc. RDNT is provider of outpatient diagnostic imaging services in the United States. As of second quarter 2018, the company operated 304 facilities directly or indirectly through joint ventures with hospitals in California, Delaware, Florida, Maryland, New Jersey and New York.

This Texas-based company has a Zacks Rank #2. The company has expected earnings growth of 22.41% for the current year. The Zacks Consensus Estimate for the current year has improved 2.9% over the past 60 days.

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