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3 Winners From QE3

Rich Duprey
September 16, 2012

With the Federal Reserve committing to buy $85 billion worth of securities every more -- including $40 billion worth of mortgages -- until the market recovers, while also announcing it will keep interest rates at extreme but artificially low rates until at least 2015, the market jumped 206 points, or 1.6%. But some stocks were bolstered even more by the import of the news and rose by double-digit percentages.

While not every stock jumped because of the huge stimulus program, resist the urge to high-five everyone in the cubicles next to you. Smart investors won't celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks could just as quickly make the return trip down.

The dustbin of history
Firing off another blast from his bazooka, Ben Bernanke lifted the spirits of resources and financial stocks, two sectors of the economy that will benefit most from the money that will rain down from his helicopter drop. The Motley Fool CAPS Coal sector rose 2%, Financial Services was up 2.5%, and Steel & Iron jumped 2.7%.

Little surprise why financial-services stocks were higher, but the resources bunch was up on the hope that the massive inflating of the economy will lead to new economic growth. Just like the recently announced Chinese stimulus program for infrastructure, there may just be more need for steel and iron ... and the coal necessary to make it if Bernanke is able to light a fire under the economy.

Industrial metal stock Molycorp (NYSE: MCP  ) rose 5% and copper miner Freeport-McMoran was up 4%, but it was Alpha Natural Resources (NYSE: ANR  ) and Arch Coal (NYSE: ACI  ) that that did best, rising 12% and 10%, respectively.

The long-suffering coal industry may get a boost, but the trickle-down impact is going to take some time to be felt, if it ever is. CONSUL Energy (NYSE: CNX  ) announced that it will be idling two metallurgical coal mines because of the lack of demand for steel, BHP Billiton is idling a mine because of weak pricing, and Xstrata is reorganizing its coal operations. While the closures may help restrict supply and firm up pricing, higher pricing might not be what it needs, with natural gas being similarly discounted. Already the regulatory assault on the industry is pushing more utilities to switch to nat gas, and no one is building coal-fired plants anymore. With 50 gigawatts of coal-fired capacity due to be retired, the industry can't afford to put itself at any more of a disadvantage.

Despite the industry's optics, investors see Alpha Natural Resources surviving the crunch. CAPS member rsealander finds that between the cash on its balance sheet and the credit facilities open to it, it has the financial wherewithal to survive the downturn.

Similarly, even in the face of the losses Arch Coal has been putting up, jed71 thinks it won't follow Patriot Coal into bankruptcy, because in addition to having half a billion in cash, it continues to "produce