It should surprise no one that oil stocks have taken the lead in the first quarter, while financial stocks -- after a good two-year run -- have been tamed. This is how things have shaped up through the first quarter for my 2011 stock picks. (For a look at my original picks, see here: part 1, part 2, and part 3.)

Normally, if I said a business was underwater, investors would think the worst. Actually, in the summer Noble Corp (NE) was underwater -- and investors were not impressed. However, this was a great buying opportunity, and although the company is still underwater, it is also a market leader among my stock picks and the overall market -- even among oil industry players. With its fleet of 69 offshore drilling rigs, Noble stands tall.

We are only one month into the new year and there have not been many dull moments. Games are going on in the Middle East and they are not the friendly kind. In Egypt a million plus protesters are playing a game of chicken with the Mubarak government demanding he step down from his 32-year-old reign as perpetual president.

This is not radical Islam fundamentalists; it is even more fundamental. The people want to improve their daily lives in a meaningful way. Education, infrastructure, clean water and clean streets. Speaking of infrastructure and getting back to the less dramatic but still important great stock picks Telefonica (TEF) and General Electric (GE) were the big winners so far bouncing over 10% in January.

I have already gone on record this year saying that financial companies and insurance stocks are going to continue to rebound. In my previous two posts Chasing Value: 2011 Stock Picks -- 5 of 11 and Chasing Value: 2011 Stock Picks -- 6, 7, 8, 9, I included several financial institutions. Today I add an insurance company.

The industry got whacked hard for many reasons. For one, it makes a significant amount of profit by investing its float, and like every other investor, the industry lost a pile of money in the financial crisis. It was embroiled more directly than some industries, as several insurers are affiliated with banks. Finally the housing crisis meant disruption to payment streams by homeowners who were delinquent on more than their mortgages.

This is the fifth year that I am posting my stock picks for the year. There is a lot of foolishness in doing so because each year that I have made such suggestions, including 2009 when I owned all of the picks, it is assumed that I would hold all of the positions without responding to market conditions, or changes in the specific company. No adding to, or cutting a position. This is not the real world.

It is not possible for everything to remain static. For example, you might find that you hold a stock that made a great run through three quarters, beyond your wildest expectations, and decide it has passed a point where the metrics cannot support anything close to the price. Under normal circumstances you might sell it, except you cannot. By the end of the year the profit you might have realized fades away and you end up reporting on something that is not a true measure of your objective strategy. Nevertheless, once again I will stick with this approach because this seems to be how its done in every publication's annual picks. This year there are eleven.

The year 2010 has come and gone and my results are in. This is my fourth annual stock results to be reported on BlogginStocks, so something of a track record is starting to form. This past year ended with a modest improvement over the unmanaged Standard & Poors 500 index

The original story, Chasing Value: 10 Stock Picks for 2010, took readers through a review of many candidates, concluding with the ten picks, using prices from Dec. 28, 2009.

Could a stock that you made 1,100% on still have room to run? Yes, it is possible. In particular if it had a near death experience as a penny stock for a while.

That is the case with Newcastle Investments (NCT), the CMBS lender and real estate investment company that reached a recent high of $7.10 and has settled back down, most recently hovering between $6.70 to $7.00. It closed Thursday December 23 at $6.71.

This was one of those pre-holiday trading sessions where the closing bell outcome depended on which index you looked at. Tech stocks were up with the S&P 500, but the DJIA was a mixed bag throughout the trading day. This appears to have been a 3-year high for NASDAQ and a 2-year high for the S&P. As far as the holiday-shortened week is concerned, today may be a blueprint for trading here in the U.S. and abroad.

Here were today's unofficial closing bell levels:

Dow Jones 11,478.13 -13.78 (-0.12%)
S&P 500 1,247.08 +3.17 (0.25%)
Nasdaq 2,649.56 +6.59 (0.25%)

Top Analyst Calls

The list of stocks has been whittled down to four. Chevron Corporation (CVX) made the cut to become the oil company stock. Three defense sector powerhouses are competing for one spot in Chasing Value: 2011 Stock Picks -- The Journey Begin.

Today we take a more comprehensive view returning to earlier metrics, and adding some other criteria in order to reach a conclusion. This series began with the contention that making specific predictions was a fools errand with the danger to your portfolio coming from "black swans". To try and add some general counter measures to this possibility I decided that the defense and oil sectors might provide protection against the greatest of threats, war and terrorism. On that basis I posted Chasing Value: You Must Own Defense and Oil for Safety.

The list of stocks under consideration has been reduced from eleven to ten, to seven and now in today's story four. Starting with five major defense contractors and six major oil companies (see Chasing Value: You Must Own Defense and Oil for Safety), I began a search to find one stock in each sector that might be suitable for inclusion in my list of 2011 stock picks posted last week Chasing Value: 2011 Stock Picks -- The Journey Begin.

Today we continue our analysis by examining return on equity (ROE), return on invested capital (ROIC), and price-to-earnings-to-growth (PEG). Each stock is ranked by sector and metric from best to worst. Sometimes there are clear winners and others there is little to separate one stock from the next. However, in total, a picture can be drawn that does portray a superior opportunity.

Analyst Upgrades

• Wynn Resorts (WYNN) to overweight from neutral at JPMorgan.
• Oracle (ORCL) and Alliance Data Systems (ADS) to outperform from neutral at Macquarie.
• Saint Joe (JOE) to outperform from market perform at Keefe Bruyette.
• Starwood Hotels (HOT) to neutral from underperform at RW Baird.
• Middlesex Water (MSEX) to buy from neutral at Janney Capital.
• Consol Energy (CNX) to buy from hold at BB&T.

This series started with five major defense contractors and six major oil companies that are worthy considerations to help your portfolio survive a global crisis (see Chasing Value: You Must Own Defense and Oil for Safety). After the first review, one stock was eliminated from consideration: Petroleo Brasileiro (PBR). The reason is in the first story.

Today we continue our analysis by examining price-to-book (P/B), price-to-cash-flow (P/CF), and dividend yield. Each stock is ranked by sector and metric from best to worst. In the end we hope to narrow down our choices for candidates that might be added to Chasing Value: 2011 Stock Picks -- The Journey Begins.

We at BloggingStocks and everywhere else make the full gambit of prognostications, suggestions, predictions, guesses, analogies, and so forth in an attempt to improve potential investment opportunities for all our readers and provoke discussion.

All of this has its limits, but, if you are a fan of Professor Nassim NicholasTaleb and his best seller The Black Swan then you already have been warned that the events that have the greatest impact on our lives and our investments are most often unpredictable. We cannot predict the future nor can we anticipate the tragedies that will tank our portfolio's.

While I do believe predicting the future is, how should I say, futile, there are general clues as to which way the wind blows.

Yesterday I began a review of the five major U.S. defense contractors, searching for potential stock value. The group included General Dynamics (GD), Lockheed Martin (LMT), Boeing (BA), Northrop, Grumman (NOC) and Raytheon (RTN). After examining the P/E, PEG, P/CF, P/S, and P/B, Boeing did not make it through the screens.

Today I continue the exercise, hoping to find a stock worthy of placing a bet.

Dividend Yield

• Lockheed Martin: 3.77%
• Raytheon Company: 3.16%
• Northrop, Grumman: 2.89%
• General Dynamics: 2.59%

The defense sector is down, but don't count it out. We give lip service to the likelihood of defense being a target of budget hawks in Congress, but truth be told, the same fiscally conservative members are often the biggest supporters of defense.

Equally important is that unlike many other industries, this is one tech sector that keeps most of its jobs at home and well-distributed through the country. This, too, preserves defense spending.

The major players in the industry after 20 years of consolidation are General Dynamics Corp (GD), Lockheed Martin (LMT), Boeing Co (BA), Northrop, Grumman (NOC), and Raytheon Company (RTN). In addition there are hundreds more making specialized parts in support of the majors and more still supplying basic elements like tires, wiring, computer processors, steel, aluminum, specialty glass, and ammunition. Then there are suppliers of manpower and smaller manufacturers producing unmanned aircraft drones and robots.

The third quarter of 2010 is in the books and the results are in. My picks have sagged behind the Standard & Poor's 500 Index after surpassing it by a large margin for most of the year. The original story, Chasing Value: 10 Stock Picks for 2010, was the culmination of a process presented to our readers and finally narrowed down to the select group using final prices from Dec. 28, 2009. For comparison, I tracked the S&P 500.

Berkshire Hathaway (BRK.B) is the new star of the show and Brasil Telecom (BTM) remains in the dog house.