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Pro Analysis

JP Morgan unveils its top homebuilder stock into 2018

Contractors raise framed walls at the PulteGroup Onyx housing development in San Jose, California, May 10, 2017.
David Paul Morris | Bloomberg | Getty Images
Contractors raise framed walls at the PulteGroup Onyx housing development in San Jose, California, May 10, 2017.

Homebuilders' performance surged in 2017 and should continue its trend upward next year, according to J.P. Morgan, which highlighted key growth drivers and top stocks for its clients.

"So far in 2017, our homebuilder universe has delivered its best performance in nearly 15 years, up 64 percent on an absolute basis and 43 percent on a relative basis, which represents the group's strongest gains since 2003," J.P. Morgan analyst Michael Rehaut wrote Tuesday.

He added that sector rotation in consumer discretionary stocks as retail fell out of favor earlier this year combined with optimism on corporate tax reform have been "the two most important drivers of the sector's outperformance."

With homebuilding expected to perform well in 2018, J.P. told investors that one company in particular looks "highly attractive" from a valuation standpoint.