10 Plays to Make on the ‘Bernanke Put’

by Johnson Research Group | September 17, 2012 7:30 am

Ben Bernanke and the Federal Reserve dropped their latest round of quantitative easing[1] on the market last week, announcing that the Central Bank would spend $40 billion a month to buy mortgage-backed securities until there is a significant improvement in the unemployment rate.

We’ve continued to point out that it’s hard to be bullish on monetary policy alone, but in some cases you have to recognize when a trade opportunity has been created and just go with the flow.

Enter the most recent results from our technical scoring system.

QE3 will focus the “Bernanke Put” on the housing market and related stocks. The 10 companies listed in the table below represent the results of filtering for dividend-yielding stocks that are ranked among the strongest technically by our proprietary system. From our scoring system’s perspective, these stocks are likely to outpace the market as they ride the sugar buzz created by QE3:

Of notable interest on the list are the heavy weighting of REITs and the presence of the NYSE Euronext. From our perspective, real estate and related industries are likely to benefit dramatically by the fact that QE3 is participating in the mortgage-backed securities market.

We liked the housing and real estate sectors before Uncle Ben started writing checks to keep mortgage rates low. Now, it’s likely that the Street will start following the money trail, helping these stocks break into a leadership role.

NYSE Euronext

Click to Enlarge Let’s face it: In addition to helping the economy, the Fed wants to help investors regain confidence and interest in the markets. With so much money on the sidelines, in money markets and other cash alternatives, there’s a lack of activity on the exchanges.

Investors looking for a long-term hold might consider NYSE Euronext (NYSE:NYX[2]) shares. The exchanges will benefit when, not if, the sidelined cash starts flowing into equities, and the Bernanke Put might help get this rolling. As a benefit, NYX stock yields 4.7% to help investors bide their time.

Duke Realty

Click to Enlarge Duke Realty (NYSE:DRE[3]) is one of the giants of property management, leasing, development, construction, build-to-suit and other tenant-related services. The company’s focus in the office market has huge upside potential as the economy and hiring see improvements.

Given that the Fed’s action is dependent on improvements in the employment market, a bet on one of the giants of providing places for people to work is not out of place. We’re targeting a move to $20 over the near-term.

Plum Creek Timber Company

Click to Enlarge Plum Creek’s (NYSE:PCL[4]) focus is interesting, as it manages land to produce lumber, plywood, medium-density fiberboard and other lumber-related byproducts. In addition, the REIT also focuses on mineral extraction and natural gas production, communication and transportation.

In other words, this is a Swiss-army REIT.

We love the fact that the Trust has a tie to the lumber industry given the rebound in housing that the FOMC is now financing with the QE3.

The Bernanke Put will have a great positive effect on this supplier with ties to energy, making PCL an upside potential giant. The shares have run more than 6% higher during the past few days, but look to shoot to $50 as investors load into these housing-related stocks.

As of this writing, Chris Johnson did not hold a position in any of the aforementioned securities.

Source URL: https://investorplace.com/2012/09/10-bernanke-put-plays-nyx-dre-pcl/

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