The Canadian dollar is currently trading at or around parity to the US dollar. This is great for those interested in some outlet mall shopping south of the border, but what does it mean for you the penny stock investor? The answer, like always in investing is, “it depends.” That is the case in a couple of ways.

Trade

What parity boils down to for all of the Canadian penny stocks is trade. In many cases companies are either manufacturing goods in Canada and exporting them out of the country or mining them outside the country and selling them in Canada (or exporting again).

For companies that are solely focus on manufacturing and selling within Canada the impact will certainly be lessened. These companies will be affected by overall macroeconomic trends and the impacts parity creates therein, however they won’t be as immediately impacted as other companies. In fact, if these companies are sourcing their raw goods from a country that is pegged to the US currency then they might be in a good position to be winners in dollar parity.

The companies that are usually more common at penny stock levels are ones that are mineral exploration companies or research based companies. The exploration based companies can benefit from the fact that their funds that have been raised through public offerings of stock can go further towards the big find, however producer who may be exporting to the US.

It’s certainly a buyer beware and taking parity into consideration as part of your due diligence is worth considering, especially in today’s fragile recovering economy. Any misstep and the parity could swing even further in Canada’s favour. If you know the right stocks that will benefit from this you may be in a good position to profit.

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