4 Stock Strategies From Wall Street: Feb. 9 (Update 1)

3) A Housing Strategy for the Impatient

Analysts at JP Morgan have a housing investment strategy for the next 30 days: Investors considering stocks in homebuilding and building products should hit the pause button now.

"Following continued robust performance by the builders, as our universe has gained 25% over the last 30 days, we believe the sector is due for a pause near term (absent further strength in the macro data), as we expect only a minimal amount of industry and company specific catalysts over the next 30 days, point to many stocks near or at their 52-week highs, and also note the already fairly strong positive investor sentiment towards the group, in our view," writes the firm.

"Regarding stock selection, we believe the higher beta names that were strong outperformers are more likely to consolidate to a degree and underperform their peers, while conversely, lower beta names should be more stable."

JP Morgan splits its picks into long and shorts. On the long side, the firm picks Toll Brothers (TOL), Lennar (LEN)and D.R. Horton (DHI). On the short side, the firm says it assigns "higher beta" to Hovnanian Enterprises (HOV), Beazer Homes (BZH) and KB Home (KBH).

As for building products, the sector may see a similar fate: "We believe the group's recent gain -- up 18% over the last 30 days -- was also influenced by increased positive investor sentiment regarding housing, and hence, expect a near term pause as well."

On the long side, the firm says it expects positive fourth quarter results and guidance from Owens Corning (OC). It also likes Stanley Black & Decker (SWK) as a defensive stock. On the short side, the firm says is expects USG (USG) to give up some gains and has lower expectations than consensus for Beacon Roofing Supply (BECN) and Mohawk Industries (MHK).

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