Cablevision Systems Corporation (CVC), Hewlett-Packard Company (HPQ): S&P 500’s Top 3 Performers: Is it Time to Sell?

Even when the pace of cash generation improvement is not expected to continue (given that much of the benefit came from a re-leveling of working capital) I think full year FCF of $8 billion is reasonable figure. On the other hand, with Hewlett continuing to eliminate operating company debt, there is scope for a return to more robust capital distributions (buybacks and dividends).

Trading at 2013 7 times P/E, I think there is more compelling alternatives within Hewlett Packard’s sector. I would sell the shares at current market prices.

Stunning operating results

Micron Technology, Inc. (NASDAQ:MU) is incredibly well positioned for the future since supply and demand in memory continue to support higher prices, demand drivers in DRAM are stronger than expected for both smartphones and gaming, a product refresh from Apple Inc. (NASDAQ:AAPL) (the world’s largest consumer of NAND) is coming soon and its ability to deleverage the balance sheet as FCF growth continues.

Trading at 2014 8 times P/E, I think Micron still has a wonderful upside potential.

Foolish bottom line

Clearly, past results are not always a great proxy for future results. When analyzing stocks that have out-performed the market strongly, you should forget about performance and focus on fundamentals. High M&A probabilities can, of course, be an exception to simple fundamentals since high M&A probabilities do justify a generous valuation. Looking at fundamentals and M&A probabilities, I would sell Cablevision and Hewlett Packard while buying more Micron shares.

Federico Zaldua has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Federico is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article S&P 500’s Top 3 Performers: Is it Time to Sell? originally appeared on Fool.com is written by Federico Zaldua.

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