Buying Xerox

By Travis Johnson, Stock Gumshoe, December 14, 2010

I’ve noted a few times in this space that there are some “old tech” companies that have my interest right now — one of them is Corning (GLW), which I bought a month or two ago, and the other that kept coming to the top of my list is Xerox (XRX), so I picked up some Xerox shares this week.

I like Xerox for a lot of reasons — they’re continuing to innovate in office machines and printing, which is great (including their solid ink printing), but I’m also a big fan of the ACS acquisition that gave them a far larger services business with high renewal rates and high margin revenue.

I’ve liked this stock for a little while and had been hoping for more of a pullback — but as with Corning, a position I’d also like to add to, the shares are in such a solid uptrend that it seems foolish to be any more patient with stocks whose valuations I think are very compelling. Both GLW and XRX trade at forward PE ratios of about 10 and have very low growth expectations going forward — expectations that I think are too pessimistic given the history of innovation at these companies, and their high margin innovations (GLW) and services (XRX). This is a small entry position, and I’ll be looking for a chance to build on it if I continue to like what I see from Xerox (and Corning, for that matter) in the months ahead.

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