Xerox: A Compelling Turnaround
01/02/2004 12:00 am EST
"Smart money is now selling on strength; that doesn't mean the market will turn lower immediately, but it does suggest that we can look for a meaningful correction in the near future," says Elliott Gue, editor of Wall Street Winners. "But there are some stocks that will offer nice gains in the New Year, such as Xerox."
"Xerox (XRX NYSE) is one of the most compelling turnaround stories in today's market and it looks like a great buy. While Xerox is a venerable brand name by any measure, the company is in the midst of a major restructuring plan-a few years ago, the company nearly went bankrupt. Slow-selling products, accounting irregularities and high debt combined to push the company to the brink of disaster. But Xerox is righting the ship. A major management reshuffle has prompted significant reform. And, after restating earnings and paying a fine to the SEC, Xerox's accounting troubles are behind them."
"On the operational side, the company has added popular product lines and divested under performing assets. The company has already started to pay off some of its debt burden. On the charts, Xerox has been in a long-term trading range of between about $5 and $10 since late 2000. Recently, Xerox moved above the top of that range on heavy trading volume. The market is voting that Xerox is back on the path to sustainable growth. One of the basic tenets of technical analysis is that the longer a base is, the more meaningful the breakout. A three-year base suggests that a major new up trend in the stock is emerging."