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Cramer: Unleash the hounds—time to buy Xerox

After a long history of underperformance, Jim Cramer had written off the stock of Xerox as a dog on Wall Street. But after taking a look at the chart, he decided to rethink his entire approach.

Cramer consulted with technician Bruce Kamich, who is a professor at Baruch College and a colleague of his at RealMoney.com.

Looking at the daily chart of Xerox, Kamich found that the stock has been making its way higher since the beginning of the year. It has rallied so hard lately that the stock is now above both its short-term 50-day moving average and its long-term 200-day moving average.

Kamich thinks Xerox could be on the verge of a major breakout.

If the stock can reach above $11 a share, Kamich believes that there could be a quick run up to $13 or higher.






"I'm saying it is time to unleash the hound, it is time to buy the stock of Xerox." -Jim Cramer

At the end of January, Xerox announced it would split itself into two separate companies: a document technology business dedicating to printing and copying, and a business process outsourcing business. While Cramer generally loves break-ups, he wasn't willing to take the stock out of the doghouse — until he saw the charts.

"When I saw that the chart had turned positive, it made me wonder if perhaps this breakup might be enough of a needle-mover to make the stock actually worth owning," Cramer said.

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And it turns out, the fundamentals could back up the action of the charts, too. In his research, Cramer found that Xerox looks to have gotten itself together and could become a genuine winner.

"That's right, I'm saying it is time to unleash the hound, it is time to buy the stock of Xerox," Cramer said. (Tweet This)

And while Cramer does recognize that Xerox has some serious issues, he also knows that after a string of disappointing quarters it has finally decided to do something to change that. Last November, noted activist Carl Icahn purchased a 7.13 percent stake in the company with the plan to talk to the board about unlocking further value.

In fact, with plans to break up and a strategic transformation program to generate $600 million in cost cuts, this story reminded Cramer of last year's big Hewlett-Packard break-up. Just like Xerox, Hewlett-Packard had fallen into a rut and decided to break up. It has only been a few months since the HP Enterprise spinoff, and it has already created tremendous value, and Cramer thinks there is plenty more to come.

"Crucially, I think we could see a similar result from the impending break-up of Xerox," Cramer said.

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