5 stocks to profit from a weak dollar

General Cable

A decade ago this maker of copper, aluminum and fiber-optic cables for electric utilities, communications networks and industrial plants sold almost all of its product in the U.S. market. Today just 45% of General Cable's (BGC, news, msgs) sales are in the relatively slow-growing North American market; 25% of sales are in Europe, the Middle East and India, 15% in Africa and the Asia-Pacific region, and 15% in Central and South America. In North America, revenue climbed 16% in the third quarter of 2007 from the third quarter of 2006, while revenue was up 35% in Europe, the Middle East and India.

The company's global footprint grew in October when it acquired the global wire and cable business of Phelps Dodge International from Freeport McMoRan Copper & Gold (FCX, news, msgs). General Cable's acquisition gives it equity stakes in two companies selling to China's energy market, and it's a market leader in South and Central America.

The company's biggest competitors include Alcatel-Lucent (ALU, news, msgs) and Japan's Sumitomo Electric (SMTOY, news, msgs). Not everything is rosy in General Cable's markets, however. Demand for lower-power residential electrical cable is down along with U.S. housing starts, and the telecommunications business has been soft for most of 2007. But that's been balanced by continued huge demand from the global build-out of electrical-distribution systems.

Middleby

In the U.S., the restaurant sector served by this maker of commercial- and industrial-food-service equipment such as stoves and fryers is growing at a rate of roughly 2%. Middleby (MIDD, news, msgs) is growing faster than that -- organic sales growth topped 6% in this year's third quarter -- thanks to a pipeline of 20 products set to launch over the next two years and the company's increasing presence in international markets.

Middleby's goal is to increase international sales to 30% of company revenue within five years, up from 19% in 2006. International sales climbed by 39% in the third quarter of 2007 from the second quarter of 2006. Sales in Asia grew by 69%.

The company's international-sales strategy isn't one of taking market share from competitors -- although Middleby is a relentless acquirer of smaller competitors -- but of riding the Asian restaurant boom that has resulted from rising incomes in China and India.

Pentair

Pentair's (PNR, news, msgs) shares have fallen with troubles in the U.S. housing industry, dropping 11% from Sept. 4 through Dec. 4. That's not surprising for a company that sells equipment for pools and spas. Fewer new houses mean fewer new pools.

But the company hasn't stopped its international expansion because of its domestic troubles. North America still makes up 72% of Pentair's sales, but the company's fastest-growing markets are in Asia. Pentair employs 575 workers in India, for example, where it has set a target of installing 50 to 60 water-treatment systems a month. The company has plans to get 25% of sales in its water business from Africa, Asia and the Pacific region within five years, up from 5% to 7% now. New products in desalination and filtration should help drive that growth, which works out to a better than 30% annual compound growth rate of growth.

Pentair has been part of Jubak's Picks since Nov. 2.

Wabtec

Wabtec's (WAB, news, msgs) shares fell 11% from Sept. 4 through Dec. 4 on fears of a slowdown in orders from U.S. railroads for freight cars. I don't think that's as big an issue as investors have made it out to be, however. Because, first, Wabtec has diversified from providing braking and control systems to the builders of rail freight cars into the aftermarket for rail-car replacements and upgrades, where adding a Wabtec system can reduce labor costs.

The company also has expanded into the transit business, which shows fewer signs of a decline than the freight business. About 54% of Wabtec's revenue comes from aftermarket replacement parts and upgrades, and 43% is from transit instead of freight. Transit revenue grew by 80% in the third quarter from the third quarter of 2006.

Wabtec's international business has grown from about 15% of revenue in 2002 to 38% in the third quarter of 2007. International revenue, by my calculation, was up 80% in this year's third quarter from the second quarter of 2006.

All of these stocks have market caps of less than $4 billion, and all should pick up market share thanks to a weak dollar. That market share should stick with them even after the dollar strengthens.

I'm adding Dynamic Materials to Jubak's Picks now because its shares have more momentum and might get a better ride from any Federal Reserve interest-rate cut and the weaker dollar that would result. But I'll look to add other names from this group as we move into 2008.

Continued: Updates and developments

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