By now, every investor who's been paying even mild attention to the markets knows of the strong connection between stocks and the dollar. When the dollar goes down, the market goes up and vice versa.
But is there any method to the market's madness? Are all stocks going up when the dollar falls, or are investors making any actual choices? Have they bid up higher those stocks that could reasonably be expected to benefit from a falling dollar because of greater overseas profits?
We set out to find out. Using data from S&P and Reuters, we set up a simple study: Since the market bottom, have the stocks of companies with greater foreign sales as a percentage of total sales outperformed those with little or no foreign sales?
You can see the full results below, but the short answer is an emphatic YES! Stocks with greater foreign sales have done far better than those with little or none. Actually, they have performed twice as well since the March bottom as both the market and the group that is primarily domestic.
We looked at the top and bottom 30 companies in the S&P ranked by foreign sales as a percentage of total sales. We had full 2008 data for 335 of the S&P 500 companies and excluded three companies because of concerns over the data.
Our results: Since March 1, the stocks of the top 30 companies ranked by foreign sales rose 100 percent. The stocks of the bottom 30 went up 51 percent, just about what the overall S&P did.
The stocks of the top 30 were heavy in the information technology sector, fully 17 of the 30. Names included AMD , which says $9.7 billion of its sales were foreign, or 88 percent. Its stock rose 247 percent during the period from March.
Also in the group were Teradyne , Western Digital and LSI , all with triple digit returns. But the 17 tech companies in this group outperformed tech as a whole with a 90 percent return over the period, compared with 66 percent for the IT companies in the S&P as a whole.
As for the 30 "laggards," it goes without saying they didn't do too badly. A 51.75 percent return is nothing to be too upset about. And it was a more diverse group, with consumer discretionary and staples making up the largest share with eight companies. Six of the companies were utilities, the second to worse performing sector in the S&P. Those six companies posted only a 23 percent return.
A major caveat is that some companies may not provide full detail of their foreign sales and others may show a large percentage because of how they choose to report the sources of their revenue. In addition, some companies may hedge currency exposure and may or may not report that.
But this cursory look at whether the market has used any discretion in its dollar-fueled march higher is a pretty emphatic initial sign that the market knows which companies stand to benefit from changes in currency. And it might be a place to begin investigating which companies stand to lose and gain the most from a weaker or even a strong dollar.
Click ahead to find out which stocks have the biggest foreign sales, which have the least, and how they've done since March 1.