5 Picks for 2011 With Upside Up to 143%

NEW YORK (Karvy) -- Northern Dynasty Minerals (NAK), Ivanhoe Energy (IVAN), Hewlett Packard (HPQ), Itron (ITRI), and EnerNOC (ENOC) could outperform their respective sector peers and offer upside in the range of 31% to 143%, implied from the consensus estimates of price targets.

These stocks span diverse industries, namely mineral exploration and mining, CleanTech, utilities, oil and gas, and information technology.

Northern Dynasty shines on the back of a rapidly growing metals industry. Mining investments are expected to range between $115 billion and $120 billion during 2011, higher than the record $110 billion in 2008, the Financial Times reports.

Meanwhile, EnerNOC may benefit from the current buzz in clean technology. As the world becomes a more efficiently mobilized place, Itron, the smart meter company, seems an attractive buy. With oil prices scaling to record highs, Ivanhoe continues to discover new oil fields, which could fuel investments in the company. HP can leverage the acceleration in global tech spending in 2011.

The five stocks are stacked in terms of upside, great to greatest.

Hewlett-Packard is a computer and printer maker.

It recently secured a $2.5 billion, 10-year information technology outsourcing contract from NASA. Under the contract, HP will manage NASA's personal computing hardware, agency-standard software, mobile IT services, peripherals and accessories, associated end-user services, and supporting infrastructure.

HP also signed a five-year services agreement with BP ( BP) for delivering consistent global data center services to enable BP standardize and consolidate its hosting services and leverage innovations such as cloud computing. The contract value exceeds $400 million.

For 2011, HP's software acquisition strategy will focus on Business Intelligence --- the industry's emerging sector. For this, it may acquire a leading brand in the well-established pure-play of BI. A few of the potential targets include MicroStrategy ( MSTR), Teradata ( TDC), KXEN or Angoss. The company is looking at niche areas such as data mining and predictive analytics and technologies that complement BI.

HP is planning to set up three outsourcing centers in India as part of its $1 billion investment plan announced early last year to transform and expand its enterprise services business. HP is considering low-cost centers like India to contend with competition from International Business Machines ( IBM), Accenture ( ACN), and Dell ( DELL). HP is planning to service its clients along with Indian outsourcing company MphasiS, in which HP has a majority stake.

Of the 38 analysts covering the stock, 71% recommend a buy with a target price of $55.04, implying an upside of 30.1% from current levels. For the first quarter of 2011, the company has raised its notebook shipment forecast by 10% because of strong demand from China.

For 2011, HP raised the mid-point of its revenue guidance to $133 billion, indicating year-over-year growth of more than 5%. The earlier estimated levels ranged between $131.5 billion and $133.5 billion.

Ivanhoe Energy is an independent heavy oil development and production company operating in four segments: oil and gas-integrated, oil and gas-conventional, business and technology development, and corporate.

The company's two initial HTL heavy oil projects are Tamarack in Canada and Pungarayacu in Ecuador. The other conventional oil and gas activities undertaken at various other projects are originated or sourced from these two major projects. During December, Rio Tinto ( RIO) said it was mulling a plan to raise its stake in Ivanhoe to 43% from 35%.

The company recently announced a significant gas discovery at Sunwing's Yixin-2 well in Southwest China, which analysts believe will benefit the company as the region is among the most productive gas regions in China. Companies like China Petroleum & Chemical ( SNP) and PetroChina ( PTR) had earlier discovered major gas reserves in adjacent locations. Ivanhoe adds that initial gas flow rates from the well are about 13 million cubic feet per day, averaging 9 million to 10 million cubic feet per day during the 24-hour test period.

With the company currently ramping up exploratory and development opportunities across its properties in Ecuador, China, Canada, and Mongolia, it could be generating critical results from China and Ecuador in the upcoming three months, a TD Newscrest analyst said. This will provide Ivanhoe a significant advantage and make 2011 a breakout year for the stock. In addition, a great amount of value-addition would be sourced from oil sands development at Tamarack in Canada. With a production capacity of about 40,000 barrels a day at Tamarack, the first bitumen production is expected by the end of 2013.

The company's CEO said since China's demand for natural gas is outpacing supply, Sunwing Energy has a competitive advantage to support the budding market on favorable commercial terms.

All five analysts covering the stock recommend a buy with a target price of $3.61, implying an upside of 28.8% from current levels. The stock has gained 0.7% year to date.

Itron is engaged in providing a portfolio of products and services to utilities in the global energy and water markets. Operating through subsidiaries, the company provides metering, data collection, and utility software solutions. The company accounts for a 46% share of the smart meter market in North America, and a 35% share of the global meter-management software market.

Itron and Silver Spring Networks recently announced an expanded agreement to integrate Itron's Centron II electricity meters with Silver Spring's Smart Energy platform. While the integration is underway, customer orders will be accepted for delivery by mid-2011.

For 2010, earnings per share are likely to jump 90% from a year earlier. Revenue growth is estimated to be in the range of mid-20s, higher than analysts' estimates. The European Union is keen to replace its conventional meters with smart meters by 2020. Industry analysts believe that this could eventually lead to big contract wins for Itron during the upcoming years.

Smart meters are expected to support the shift to electric cars and allow for the storage of power produced by renewable sources like wind and solar. Of the 2.7 billion meters installed worldwide only 9% are automated, which clearly reflects the huge untapped market for Itron.

Itron has entered into an agreement to acquire Asais, an energy information management software and consulting services provider for an undisclosed sum. The deal is likely to close during the first quarter of 2011.

Analysts believe that this is a value stock with a high earnings growth rate. Of the 32 analysts covering the stock, 56% recommend a buy with a target price of $74.87, implying an upside of 34.8% from current levels. Meanwhile, 41% of analysts recommend a hold.

EnerNOC is a provider of clean and intelligent energy solutions including demand response services, energy efficiency, or monitoring-based commissioning services, energy procurement services, and emissions tracking and trading support services. At the end of the third quarter, the company boosted its commercial, institutional, and industrial demand response network to more than 5,100 megawatts under management, across more than 3,500 customers at 8,200 sites.

The company recently entered into a definitive agreement to acquire Global Energy Partners, an industry leader in designing and implementing utility energy efficiency and demand response programs, in order to expand its target market. EnerNOC also announced its participation in the U.K. Power Networks' Low Carbon London project to help the U.K. achieve its goal of moving to a low-carbon energy future. The partnership will run for three years starting this month.

JPMorgan favors ENOC as a long-term position because of the company's high-growth business model.

The EnerNOC model uses network operating centers to provide energy management and efficiency solutions for grid operators, utilities, and large companies. Generally, utilities invest in excess capacity to handle unusual demand spikes. The International Energy Association believes that load sharing with other utilities helps these companies save a huge sum of money, thereby cutting the need for additional power plants. Through this cost containment, utilities worldwide will save almost $60 billion in the upcoming 20 years.

The company is well-positioned in the demand response market as it plans to launch two additional demand response products offering higher availability, enabling greater market penetration.

Of the 27 analysts covering the stock, 63% recommend a buy with a target price of $35.80, implying an upside of 49% from current levels. Meanwhile, 33% of analysts recommend a hold.

Northern Dynasty Minerals is a Canada-based company engaged in the exploration of mineral properties. The company has a 50% interest in Pebble Partnership, owner of the Pebble copper-gold-molybdenum project, one of the largest gold-copper deposits in the world, located in Alaska. Rio Tinto ( RIO) has a 19% controlling stake in Northern Dynasty, while Mitsubishi owns 11%.

The Pebble gold-copper deposit, 50% owned by Anglo American, is the fifth-largest copper deposit containing 80 billion pounds copper, 107 million ounces gold, and 5.6 billion pounds molybdenum.

Once brought on stream, the project would be among the 10 largest copper producers in the world and among the major producers of gold and molybdenum. Production is likely to begin as early as 2016 with the pre-feasibility study slated for completion by 2012. On average, molybdenum reserves are estimated to account for almost 15% of Pebble's revenue, producing about 18% of global production.

All the four analysts covering the stock recommend a buy with a target price of $29.4, implying an upside of 107.6% from current levels. On a year-to-date basis, the stock has gained 68.6%. Based on the price Anglo had agreed to pay a few years ago for its 50% stake, the stock should currently trade at $20 vs. its current price of $14.19, say industry analysts.

Leaving aside solar and wind, natural gas is seen by analysts as emerging as the top performer during 2011. It is widely known that the keenly awaited U.S. natural gas legislation that Congress has been defending is seen clearing in 2011. Furthermore, with rising oil prices and the natural gas bill likely to be passed, a common ground is anticipated in the new session with Congress giving a boost to natural gas companies.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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