Apple Inc. (AAPL), Hewlett-Packard Company (HPQ): Top CAPS (Investment) Ideas for the Second Half of 2013

Thus, with Hewlett-Packard Company (NYSE:HPQ) currently trading at just four times last 12 month’s free cash flow, and now hinting at overall revenue growth in fiscal 2014 (ends October 2014), I think the company could continue to recover some of its 40% losses during the last 30 months.

Just sell it!

When a company’s valuation is solely related to revenue growth, and revenue growth begins to decelerate, it’s only a matter of time before that company’s valuation begins to decline as well. Such is the case with Workday Inc (NYSE:WDAY), a company with operating margins of (38.65%).

From 2012 to 2013 the company grew revenue by 105%, which was the basis of it being valued at 35 times 12 month’s sales. However, growth is decelerating. In its 2012 third quarter report, revenue grew 99% year-over-year. In the fourth quarter it grew 89% and in the first it grew just 61%.

The company is now expecting 2013 growth of 58% and growth of 50% in 2014. In my opinion, this decelerating growth is not enough to maintain such a lofty valuation, which might explain why the stock has declined 9% in the last month. If logic prevails, this decline should continue throughout the remainder of this year – and shorting Workday Inc (NYSE:WDAY) should add to the 7.9 points it has already gained in My CAPS.

Final thoughts

Today, I have presented you with four of my best ideas for the remaining six months of 2013. It’s your decision as to whether you use them for CAPS or as investment ideas, but I do think each stock is worthy of your due diligence.

Personally, I think Apple Inc. (NASDAQ:AAPL) is most attractive. I think it has the perfect balance of value, catalysts, and support with its buyback program to create the largest of gains. However, I do plan to use each of these plays as cornerstones to my next six months, both in CAPS and in my portfolio.

Brian Nichols owns shares of Apple and Alcatel-Lucent. Brian is short Workday. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL). Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Top CAPS (Investment) Ideas for the Second Half of 2013 originally appeared on Fool.com and is written by Brian Nichols.

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