Top January Stocks: D.R. Horton, Lennar, Realty Income

Homebuilder stocks are getting a shot in the arm today, thanks to some impressive housing price data. Interestingly, if past is prologue, this sector could have room to run early in 2017. Looking back 10 years, several homebuilders have been among the best stocks to own in January, including D.R. Horton, Inc. (NYSE:DHI), Lennar Corporation (NYSE:LEN), and Realty Income Corp (NYSE:O).

The chart below lists the 25 top January stocks on the S&P 500 Index (SPX) during the last decade, courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Let's take a closer look at DHI, LEN, and O have historically fared in the first month of the year.

D.R. Horton, Inc. (NYSE:DHI)

DHI has been positive 70% of the time over the past 10 Januaries. On average, the homebuilder stock has gained 5.5% during the month -- though its brutal 2015 and 2016 returns demonstrate that there are no sure things when it comes to stocks. In any case, the shares could certainly use the seasonal boost, as they've been declining since topping out at a 10-year peak of $34.56 in late July, and are now clinging to a foothold in the $27.50 area.

Options players are banking on another January bounce. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly six DHI calls for every put. The corresponding call/put volume ratio of 5.95 is only 3 percentage points from an annual peak, meaning calls have been bought to open over puts at a near-annual-high clip.

Lennar Corporation (NYSE:LEN)

LEN, meanwhile, has only been negative in January two times in the previous 10 years. On average, the stock has advanced 3.5% during the month -- though last year was a notable exception. Technically speaking, the shares have surrendered more than 11% year-to-date to trade at $43.37, but may have found a floor at the ascending 50-day trendline -- with the equity up 1.9% this afternoon.

Another strong January would be a boon to call buyers. LEN has racked up a top-heavy call/put volume ratio of 3.41 during the past two weeks, which ranks in the top one-third of all readings from the past year. In other words, options traders have been buying to open calls over puts at an accelerated clip of late.

Realty Income Corp (NYSE:O)

Finally, real-estate investment trust (REIT) O has been positive 80% of the time over the past 10 Januaries, with an average gain of 3.1%. In fact, the shares haven't finished the month lower since 2009 -- in the midst of the financial crisis. Looking more closely at 2016, O is up a respectable 9.6% year-to-date at $56.55, but has pulled back more than 20% since its record high of $72.30 in early August.

As with its sector peers, O sports a call-skewed 10-day ISE/CBOE/PHLX call/put volume ratio. Specifically, the ratio of 24.24 outstrips 99% of all readings from the last year, with most of the action occurring at the January 2017 60-strike call. Long story short, it appears plenty of bulls are counting on history to repeat itself next month.

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