Xerox (XRX)

Previously this was a company that people thought just made copiers but they have been moving away from this business over the last couple of years to become a more service oriented business. Looking out to 2014 and beyond, 60% of the business is going to be services revenue. Services revenue tends to become more stable and if so, people will pay a higher multiple on those earnings going forward. You have to understand that this is going to be a multiyear story. It will take time to make the transition with a lot of hiccups along the way. Pays a decent dividend in the meantime.

A free cash machine, going to throw off $1.6-1.9 Billion this year. About 7 times free excess cash flow. Over half of the company is outsourcing, which is a growth area. Dividend increased 35% this year, share buy backs significant, paying down debt, making acquisitions. Moving forward but being treated like a company that is going nowhere.

Done well for the last 8 or 9 months, recently braking to a new high, above its 20 day moving average and is outperforming the market. It is a winner so stick with it.

Watching to see if they can transform into a service company. The question is if the sentiment is strong enough for institutional investors to own this company. He likes the company. Put in a half position until you see an uptick in the numbers (revenue).

There some base building and some indicators that it is not too oversold. All the right things on its side. Stop at $8- $8.25.

Nearly half of this company is in IT and business outsourcing. Generating free cash flow of over $1 billion a year and have been using the money for the last couple of years to raise the dividends and buy back shares. They are reducing the share buy back a little bit and focused on paying down more debt and making acquisitions. Poised to have better performance as the service business is growing.

Seasonality is difficult to predict on this because it is not quite a technology company or consumer discretionary. Established an upward trend from the middle of November and is above the 20 day moving average. Will probably go higher until May.

New low. They are in transition. They are trying to re-invent themselves. Why would they buy back shares now? Spend it on capital spending or R&D. Companies don’t shrink themselves to greatness.

(A Top Pick Sept 20/11. Down 0.95%.) This company is throwing off $1-$1.20 a share of free cash flow. They are well on the way to transitioning out of the old Xerox. Made a huge acquisition of a business IT outsourcing company. This is truly the growth driver for them. It is a huge cash flow generator. Really cheap at 7X earnings. Management is buying back a huge amount of stock.