Stock Ideas For A Rising U.S. Dollar

The U.S. Dollar Index hit its  highest level in over four years as the currency has become the favorite among investors around the world. The outlook remains positive for the greenback as the European Central Bank and the Bank of Japan are taking measures to keep the value of their respective currencies down.

While a strong U.S. dollar is a good thing for the country illustrating the strength of the economy, there are negatives. As a currency increases in value, it makes goods produced in the country more expensive to foreign buyers.

Considering about one-third of sales of all the S&P 500 companies come from overseas, this high will have an impact on large U.S. multinationals. The rise in the U.S. dollar could be a hot topic in the coming weeks as earnings season gets underway and companies discuss the effect of the currency on their bottom line.

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One strategy to avoid the surge in the greenback is to focus on companies that generate a large portion of their sales within the borders of the United States. Such companies will be less affected by the strong currency and could start to outperform their multinational peers.

Sherwin-Williams Company (NYSE: SHW) is an international paint and coatings manufacturer and distributor with a large portion of its sales in the United States. During the most recent quarterly report, the company generated 59 percent of sales from the paint stores group located in the United States, Canada and Caribbean. The consumer group, which is the branded and private-label products sold mainly in North America accounted for 13 percent of sales. The global finishes group, active in more than 100 countries, made up 20 percent of sales. The Latin America coatings group contributed 8 percent of sales.

With a large portion of sales coming from within the United States, Sherwin-Williams should be able to avoid the outside currency fluctuations better than competitors. The overall performance will hinge greatly on the housing market; any uptick in sales over the next year should benefit the company. Technically, the stock has one of the best long-term charts in the market even as the housing market has progressed slowly in its recovery.

Wal-Mart Stores, Inc.(NYSE: WMT) is the largest retailer and employer in the United States and generates a large portion of its sales in the country. In the second quarter of the company's fiscal year 2015, Wal-Mart reported net sales of $119.3 billion. Wal-Mart International reported sales of $33.9 billion (28 percent of all sales).

Over the last 18 months, the stock has been trading in a fairly narrow range heading into the holiday season. Two positives for the stock are the 2.5 percent dividend yield and the fact it has proven to hold up well during market selloffs. This should make the stock attractive to income investors and help diversify a portfolio. The next few weeks will be interesting as investors get a better idea of how the U.S. dollar rise has affected the bottom line.

Wal-Mart reports earnings on November 13 and Sherwin-Williams will announce quarterly earnings on October 28.