Investopedia: Hot Stocks To Start 2011

So far 2011 is off to a great start. 

Fears of a U.S. federal government shutdown? No problem. North Africa and the Mideast in an uproar? Not to worry. Rising inflation and decreasing fears about equities? It's all good.  

Not only have the markets climbed the wall of worry quite easily so far this year, they all appear to be using the same rope. The Dow Jones, S&P 500 and Nasdaq are all up about 5% so far this year. But as is always the case, markets operate like ducks on a pond - things seem quiet and steady on the surface, but there are a lot of little feet madly paddling away out of sight. With that in mind, let us look at some of the top performers in 2011.

Solar - The Sun Has Come Out Tomorrow
Solar carries the rap for being economical and attractive only because of heavy government subsidies - subsidies that will presumably go away in the newly frugal world of 2011. It's not bothering the stocks, though, as this sector is up more than 36% so far this year. While tiny solar companies have seen the sun shine, large players like Jinko (NYSE:JKS) and LDK (NYSE:LDK), with the former announcing a 23% sequential revenue jump in Monday's earnings report. (For more, see Top Solar Stocks To Watch.)


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McDermott's New Life

For McDermott (NYSE: MDR), it is now all about energy. With the completion of the Babcock and Wilcox (NYSE: BWC) spinoff at the end of July, McDermott is now an EPCI (engineering, procurement, construction, installation) company with a laser focus on the upstream energy market. In particular, the new company focuses on offshore projects in the Middle East and Asia. If Apache (NYSE: APA), Chevron (NYSE: CVX) or OMV want to build a new offshore installation (whether a production rig, subsea field or floating production system), they hire a company like McDermott to build it. 

The First New Quarter In The Books
On the surface, this third quarter was not an auspicious beginning. Revenue dropped 28%, and operating income fell about 14%, though net income from continuing operations was actually up an encouraging 39%. Although there was weak order flow for the quarter, and the company's backlog declined on a sequential and year-over-year basis, McDermott has booked $1.2 billion in new orders for October.

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Another Big Gulf Clean-Up Operation

It looks like the U.S. government is getting serious about cleaning up the Gulf of Mexico. In the wake of the BP (NYSE: BP) Macondo oil spill, the U.S. government has issued an order that will require energy companies to permanently decommission idle wells in the Gulf. Under the order, wells and platforms that have been idle for five or more years will have to be plugged and dismantled, and it would appear to include roughly 3,500 wells and 650 production platforms.

To a large extent, this move makes sense. The temporary plugs that are installed in idle wells do not last forever and can leak. Likewise, a platform can be vulnerable to severe events, like a hurricane. While severe damage is relatively rare (these platforms are built to withstand bad weather), it is nevertheless possible that a bad storm could wreck a platform and create both an oil spill risk and a hazard to navigation.

Major Gulf operators like Chevron (NYSE:CVX), ExxonMobil (NYSE:XOM), BP and Apache (NYSE:APA) could all be on the hook, as well as numerous tiny operators. Although it is not uncommon for operators to use temporary plugs for marginal wells (particularly when prices are low), this order would require permanent plugs that would not be removable later. Then again, given the high prices of the past five years, if a well has been idle for all of that time, it is not too likely that it would be coming back into significant production. (For related reading, see A Primer On Offshore Drilling.)

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