3 Stocks to Weather a Dollar Decline

“None of the above” has been a poor investment in recent months. Savers who have kept their funds in dollars since the stock market bottomed in March have missed out on more than a 60% rally in U.S. shares and a 25% rise in gold. Their dollars have also weakened by more than 16% against a basket of currencies of key U.S. trading partners.

Most investors I hear from seem to believe the dollar is headed for more punishment. The few of us who feel the dollar is oversold usually cite peer-nation weakness, rather than U.S. strength. In the long term, the dollar’s health will depend more on political will than valuation math. So far, policy makers have spoken vaguely about a strong-dollar commitment, but they haven’t announced a credible plan under which Congress will spend less than it collects in taxes in any year in the next decade.

A month ago, I highlighted three companies that seem likely to benefit from cheap dollars: Boeing (BA), Caterpillar (CAT) and Harley-Davidson (HOG). All are exporters, and all maintain large manufacturing facilities in the U.S. Their shares are up a quick 11% since then, versus 6% for the S&P 500. Below are three more stocks that seem likely to protect investors in the event of a further dollar decline. Unlike gold, they have profits and dividends against which to judge their value. And unlike currency futures or funds, they can serve as long-term investments rather than temporary bets.

Profits for chemical giant DuPont (DD) have been declining for years, but a new chief executive took over this year. She was greeted with what’s expected to amount to a 15% sales decline and a 28% drop in earnings per share this year. But there has been progress. Fixed costs are down, product introductions are up and free cash flow is strong. Management says it can increase sales by 10% a year through 2012, compounded, and earnings twice as fast. It plans to focus development spending on world “megatrends,” by making new seeds and crop products to meet a sharp rise in global food demand and producing solar energy products and bio-fuels. Nearly a third of company sales are made to emerging markets like China, India and Brazil. Shares are 17 times this year’s depressed earnings, and perhaps more importantly, carry a giant 4.8% dividend yield.

Hope you’re thirsty: Coca-Cola (KO) management recently outlined a plan to double world-wide sales, currently more than $30 billion a year, by 2020. The plan depends heavily on increased soft drink consumption in China and India. Of course, the company has more than its signature cola to push; it owns 180 brands, many of which are familiar to U.S. consumers (PowerAde, Minute Maid) and some of which likely aren’t (Quwat Jubal, a citrusy soda; Marocha Chaba no Ko, a green tea drink). Analysts say the weak dollar is turning into a growing earnings tailwind for the company. Shares are 19 times earnings with a 2.9% dividend.

Sales for Joy Global (JOYG) were up modestly in the company’s fiscal year ended October but are expected to drop 20% in its current fiscal year. That speaks more to the long lag time involved in orders for the company’s mining equipment than it does to current business conditions. Commodity prices are on a tear, which means miners the world over will find it more profitable to invest in new machines. That bodes well for Joy’s orders. Shares trade at 20 times Wall Street’s forward earnings projection, but Joy has far surpassed expectations of late, beating earnings estimates by more than 25% in its past two quarters. The dividend yield is 1.3%.