Hedge Fund Trade of the Week: Xerox
Where’s the fast money finding opportunity? In this regular feature Anthony Scaramucci aka The Hedge reveals his latest greatest pick!
This week’s trade is long Xerox , the company whose name became almost synonymous with photocopier and now employs 136,000 people in 120 countries providing what it calls true end-to-end solutions, from back office support to the printed page.
Check out some of the company’s stats:
Industry: Office Equipment
Based in: Norwalk, CT
Market Cap: $13.4 billion
52-week high: $12.08
52-week low: $8.32
Anthony Scaramucci selects this stock as his Hedge Fund Trade of the Week largely because he thinks Xerox looks like a value trade – though concedes it’s a deep, deep value.
For the most part, he’s bullish on a buy back program that Xerox intends to implement, and he expects it will drive shares, sharply higher.
”Over the next 5 years management has made a commitment to the Street that they will take 75% of available free cash flow and buy-in shares,” he says.
And that could be a lot of buying considering Scaramucci expects Xerox to generate $10 billion in free cash over that period.
”They could buy-in as much as half the shares over the next 5 years,” he says.
But that’s not all. Scaramucci also likes the business, in part because the Street doesn’t quite understand it.
“85% of Xerox business is a recurring revenue stream,” says Scaramucci, “it’s not just in equipment. It’s in servicing and consulting. I like the (new) mix of businesses.” In other words, Xerox isn’t your father’s copier company anymore.
And it’s not just Scaramucci who sees value here. He tells us hedge fund peers including Gotham, Glenview, Tiger are also long.
Click here to check out other Hedge Fund Trade Of The Week posts
* Anthony Scaramucci runs SkyBridge Capital, a leading alternative asset manager with more than $7 billion under management. Every week on Fast Money, Scaramucci, aka 'The Hedge', takes you behind the hedges, giving you an unprecedented look at the names getting the most chatter amongst the hedge fund community.
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CNBC.com with wires.