5 undervalued ASX stocks that could rise as AUD weakens

As stock markets at home and abroad continue to whiplash in the washing machine of Trump’s tariff war, one thing remains depressingly predictable.

The Australian dollar continues its long decline, with the case for additional RBA rate cuts and the impact of tariffs on Chinese industry pushing the Pacific Peso lower against all major currencies. 

This week, the Aussie dollar dropped to a five-year low against the US dollar, at 0.59 USD, and is on the verge of dropping to a 23-year low if the downtrend continues. 

So where should Australian investors turn when both the ASX and AUD are struggling?

One idea would be to look for ASX companies that earn the majority of their money in the US.

As UBS strategist Richard Schellbach wrote in a recent strategy piece, “candidates for de-rate opportunities are likely to be found in the list of Australian stocks that source earnings from America.”

“Valuations have also lost some of their froth and, although we expect earnings downgrades to follow for many, an opportunity to pick up quality businesses at reasonable prices could begin to emerge.”

In its analysis, UBS identified 39 Australian public companies with material US revenue exposure.

Of these, we then applied the following filters to produce a list of five stocks that could be under-valued and likely to outperform in the case of a weakening AUD:

• A P/E ratio below the sector average
• More than 50% of its revenue comes from the US
• A recent drawdown of 10% or more

Here’s the list:

#1 - Orora (ASX: ORA)

• Sector: Materials
• US revenue share: 71%
• Morningstar P/E: 9.88

Beverage packaging giant Orora has had an interesting few years of acquisitions and sales. 

It bought out French bottle manufacturer Saverglass in late 2023 and sold off its US business Orora Packaging Solutions to private equity group Veritiv in late 2024. 

Following these moves, Morgan Stanley analysts described it as a "focused beverage packaging business with quality assets, minimal net debt, and attractive cash flow potential" in February.

It's now at 10-year lows because of the clear impact of Trump's tariffs on its business, especially with its heavy presence in Mexico, but its most recent earnings report showed EBIT up 24.6% thanks to the Saverglass acquisition. 

#2 - Light & Wonder (ASX: LNW)

• Sector: Consumer Discretionary
• US revenue share: 69%
• P/E: 17.21

The Vegas-based gambling company earns more than two-thirds of its revenue from the US and is now down more than 20% in recent weeks.

While there's reasonable concerns that a downturn in US consumer spending would hit the gambling industry, analysis suggests there's little correlation between the two, especially in recent years. 

Ten Cap’s Jun Bei Liu even called LNW "a key player in digital and land-based gaming solutions" and told Livewire it was one of her 3 stocks to watch in a recent interview.

It ended 2024 with its net income up 61.19% and net profit margin up 55.93% year-on-year.

#3 - Reliance (ASX: RWC)

• Sector: Industrials
• US revenue share: 68%
• Morningstar P/E: 13.71

Reliance is the world's largest producer of PTC plumbing fittings with operations in Australia, Europe, the UK and India, but derives most of its revenue from the US market. 

According to deputy portfolio manager Will Mumford, Auscap took the plunge in the late-2022 selloff when RWC was hovering around a 11x PE, and were handsomely rewarded. 

It's now back at similar levels after reporting a net income increase of 31.68% in December, with revenue up to US$338 million. 

#4 - ResMed (ASX: RMD)

• Sector: Healthcare
• US revenue share: 64%
• P/E: 33.85

Recent analysis by Bell Potter identified ResMed as a defensive growth stock that enjoys a near-monopoly in US sleep apnoea treatment. 

The concerns around the emergence of GLP-1 weight loss drugs was overstated, according to Bell Potter, and RMD has maintained an annual EPS of 12%. 

First Sentier's David Wilson also recently picked out ResMed as one of the Australian companies thriving overseas. In March, he said:

"Despite the malaise or lack of dynamism around Australian productivity, those companies [like ResMed] are generating a lot of activity and a lot of growth." 

ResMed's revenue grew 10.26% year-on-year in 2024, with net income up 65.05%. 

#5 - GQG (ASX: GQG)

• Sector: Financials
• US revenue share: 54%
• P/E: 8.24

Florida-based investment management firm GQG today announced its funds under management had risen to a record US$161.9, after growing net income by 49.68% in 2024. 

It remains a founder-led firm, with CIO Rajiv Jain maintaining a 70% stake.

Aaron Yeoh of OC Funds Management argued GQG had "shown an ability to outperform through all market cycles" in an episode of Buy Hold Sell last year, which could prove valuable given the current volatility. 

He called it a buy at around an 11x PE. It's now trading at a ratio of 8.24.