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

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.