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Top 5 Bargain Stocks in the S&P 500


Photo-copy equipment maker Xerox (XRX - Get Report) may seem like a dinosaur in a world of digital documents, but a 2010 acquisition of Affiliated Computer Services for $6.4 billion gives Xerox exposure to a side of the business that has much more stability. ACS provides document management and business process outsourcing services under long-term contracts.

The net result: Xerox's sales don't grow much, but it is a remarkably profitable business. Consider that Xerox generated more than $1 a share in free cash flow in 2011, with that figure expected to rise to $1.40 by 2013, according to Goldman Sachs. That means book value is likely to keep building at a solid pace.

At some point -- soon -- investors are going to realize the disconnect between the current $7 stock price and book value which is in track to exceed $10 a share some time in 2013.

To see these stocks in action, visit the Top 5 Bargains in the S&P 500 portfolio.


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At the time of publication, author had no positions in stocks mentioned.
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