With the diabolical winter starting to wind down, traders are starting to take a hard look at the homebuilding sector to see who may have had success during the first quarter and who struggled as the polar vortex ruled. One thing is for sure, if interest rates continue to stay relatively benign going into what is the traditional big spring and summer selling time, most homebuilders could be looking forward to a strong second and third quarter.

In a new research piece, the J.P. Morgan analysts come out with a pretty straight ahead trading call on five separate homebuilding names. They point out that over the past 30 days, their homebuilding universe modest gains were largely driven by the sector’s higher beta nature relative to the market. They also believe investors’ willingness to look past recent negative industry data points and focus on last month’s optimistic commentary by the builders during their fourth-quarter conference calls held confidence up.

Strictly based on a 30-day trading call, they have three stocks to buy long and two to sell short. Investors or traders could match up one or two for a pairs trade. Remember that for conservative accounts, this is not recommended. This is for more risk-oriented trading accounts.

Here are the top three names to buy for a trade. They ranked highest on the J.P. Morgan points score, which entails allocating a pool of points within each subsector across their top long and top short ideas.

Lennar Corp. (NYSE: LEN) is the overall points winner at 120. Although it is rated Neutral at J.P. Morgan, the analysts think the stock will outperform its peers over the next 30 days. The analysts’ earnings per share estimate (EPS) of $0.31 is above the street consensus of $0.28. They also like the company’s near industry-leading gross margins of 24.8%, which while down 2% sequentially are up 2.7% year-over-year. Investors are paid a 0.4% dividend. The J.P. Morgan long-term price target is $44. The Thomson/First Call target is at $42.33. Lennar closed Tuesday at $43.72.

LGI Homes Inc. (NASDAQ: LGIH) is another name that scored high at 115 points and is Overweight rated. The J.P. Morgan team expect the stock to outperform its peers over the next 30 days, based on their outlook for solid fourth-quarter results to be reported later this month. Specifically, they estimate 65% order growth, as well as gross margins of nearly 27% (ex-inventory step up charges), while their $0.14 EPS estimate is in-line with the Street view. The J.P. Morgan long-term price target is $19. The consensus is at $18.50. The stock closed Tuesday at $16.91.

KB Home (NYSE: KBH) also scored high with 110 points and is Overweight rated. This is another name the analysts think will outperform over the next 30 days. The J.P. Morgan estimates are essentially in line with the rest of Wall Street. They are also looking for gross margins that are up a solid 3.4% year-over-year. They point out that the stock trades at a 1.4% low price-to-book versus peers. Investors receive a small 0.5% dividend. The long-term price target is $21, and the consensus target is at $19.26. KB closed Tuesday at $20.10.

The next two stocks are names that the J.P. Morgan team thinks will underperform their peers over the next 30 days and are short-term targets for a short sale.

Taylor Morrison Home Corp. (NYSE: TMHC) scored just 80 points and has had big recent gains. The stock is actually Overweight rated at J.P. Morgan. The outperformance is why they think the name could be a trade on the short side. The analysts think that plain old profit taking will show up in the near term, and traders can take advantage. The J.P. Morgan long-term price target for the stock is $28, and the consensus target is $25.89. Taylor Morrison closed Tuesday at $25.32.

William Lyon Homes (NYSE: WLH) scores the lowest short-term from the builders at 75. Like Taylor Morrison, the stock has had big gains and has had strong performance. Again, a reversion back to the mean and profit taking is expected in the next 30 days. Longer term, however, they maintain their relative Overweight rating, as valuation does not properly reflect its attractive geographic exposure as well as its longer land positions, which support the J.P. Morgan outlook for material order growth acceleration in 2014. The long-term price target for the stock is $33, and the consensus target is $29.67. The stock closed Tuesday at $31.39.

This is a rather odd exercise for a major brokerage firm. Recommending a trading short sale on a stock that you have rated Overweight long-term is a rather new twist. That said, investors are investors and traders are traders. Plus, in a very even-handed way, the J.P. Morgan analysts point out exactly what they are looking for and the narrow time frame they expect it to happen in. This is new, and it is also refreshing to see.

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