It's early into 2011, but we're already seeing a group of companies breaking out and stomping the general market. I've compiled a list of the top five performers in the telecom sector. Seeing which companies are rallying ahead of the pack might either show excellent execution from the businesses themselves, or a larger trend that could propel sub-industries forward.

In both cases, this can be extremely valuable. In the case of businesses executing, leaders in expanding fields can be discovered. In the case of larger trends, you can use the information to search out other stocks that are following the same trend, and might not have seen the same price appreciation. Call it buying into inevitable trends on the cheap.

Without further ado, here are the top five telecom performers so far in 2011:

Company

Market Capitalization (millions)

YTD Return

Global Crossing (Nasdaq: GLBC) 2,166.3 174.3 %
Level 3 Communications (Nasdaq: LVLT) 3,962.2 137.2%
Vonage (NYSE: VG) 1,044.0 108.5%
ICO Global Communications 660.6 73.3%
China Unicom (NYSE: CHU)  52,336.0 52.0%

Source: Capital IQ, a division of Standard & Poor's. Screen is for companies with market capitalization in excess of $200 million. Returns are from Dec 31, 2010, to May, 27 2011, and are adjusted for dividends.

A beautiful marriage?
It's not surprising to see Global Crossing and Level 3 near the top of the list. In April, Level 3 offered to buy out Global Crossing, and the deal was widely hailed as a transformative transaction that could turn two perennial money-losers into a profitable fiber-optic powerhouse. The deal is expected to offer cost savings of $2.5 billion between the two companies. It should also help reduce pricing pressure in the long-haul fiber-optic market. Though the combined company will only have 3.3% of the U.S. market, Global Crossing has been offering some of the industry's most aggressive pricing.

Speaking of mergers, Vonage sits in a space -- voice over IP -- that seems much more comfortable after Microsoft plunked down $8.5 billion to buy Skype. That might seem counterintuitive since Skype has to deal with a much larger competitor now, but it also raises the specter of a buyout for the company. The company is also showing more signs of life if it must go it alone; in both the last two quarters, Skype easily bested analyst estim ates and delivered substantially better results than the year before.

Finally, we have China Unicom, one of China's big three wireless carriers. Even though the company still badly trails largest player China Mobile (NYSE: CHL) in terms of the all-important average revenue per user metric of wireless carriers, China Unicom is showing better traction catching up, thanks to smartphone growth and other services. Last quarter, China Unicom showed ARPU of $6.95, an increase from $6.08 last year. While there are reports that Apple is preparing to bolt from its exclusive agreement with China Unicom by striking up an agreement with China Mobile as well, the presence of the iPhone has certainly helped the carrier in the time it has been available.

Keep updated with a watchlist
While none of the previous companies are formal recommendations, staying ahead of companies executing and in favorable industries can help you uncover more winners for the coming years. To stay updated on any of the companies mentioned in this article, make sure to add them to our new free My Watchlist feature today. You'll get up-to-date information on all the companies and can also follow larger industries like telecom services: