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Pros: Fed Put a Floor Under These 3 Stocks?
03 Nov 2010 EDT - CNBC.com
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In an effort to prop up the US economy, the Federal Reserve said Wednesday it plans to buy $600 billion in Treasurys . The idea being the purchases would drive interest rates lower in an effort to spark spending and lending, too.

But for those who don't want to be on the other side of Fed Chairman Ben Bernanke's trade, what should you be buying? Brian Kelly, founder of Kanundrum Capital, has a few ideas:

If the Fed seeks to reflate assets, they'll likely want to keep home prices up because that's the largest asset most people own, Kelly explained. To get broad exposure to the homebuilding sector, he'd consider the homebuilders exchange-traded fund. Technically, the ETF has been bouncing off the $16 range for the past month. With the Fed's announcement, Kelly thinks liquidity will start flowing and so the homebuilders will break out to the upside.

Kelly would also look at Plum Creek Timber . The Fed spending $600 billion is going to create inflation, he said, and lumber has a high correlation to inflation.

Not only does he like Plum Creek because it pays a healthy dividend, but he also thinks it's getting ready to break out. He would put a stop in at $35.25.

Also with the Fed committed to boosting home prices, Kelly thinks home improvement stocks are winners -- and in the space he likes Home Depot best due to the chart's uptrend.

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