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Xerox: A Transformation
12/30/2015 7:00 am EST
David Fried, editor Buyback Letter, focuses exclusively on stocks undergoing share repurchase programs and buybacks. His portfolio is beating the S&P 500 by more than 73% since its inception 2000. Here's a look at one of his latest buyback bets.
We bought iconic brand Xerox (XRX) in September and sold it a month later and it has risen to the top of our filters again. The Xerox name may conjure up old-school archaic photocopies, but this 109-year-old company is in the long process of moving beyond its copying roots.
Xerox is transforming itself from a print and copy powerhouse into a software company targeting businesses and local governments.
For instance, Xerox is the company behind the payment processing for California's Medicaid enrollees, as well as the electronic tolls used on some of Texas' highways.
Xerox is also pushing to move into the Cloud, especially in the healthcare sector, where everything is moving toward a digital and easily accessible environment.
While Xerox moves to become a service-oriented and higher-profit consulting business, its legacy printing business is still generating substantial cash flow in the meantime.
Interestingly, billionaire activist investor Carl Icahn is now the second biggest shareholder (a 7.1% stake purchase); financial wags say he has the financial muscle to chase a stock he believes in. He called the stock "undervalued."
Although Q3 was tepid, Xerox's 30-day trend in share price was better than its peer median. Xerox repurchased $1.3 billion through the first nine months of 2015 and has reduced shares outstanding by 11.31% in the past 12 months.
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