Cheap Stock Millionaire: A $7 Pick With 10X Potential

Shah Gilani|April 22, 2021

Here’s what I’ve got for you today…

It’s a company with a lock on government contracts across the globe – just when Biden’s White House is looking to sink trillions into infrastructure.

It’s a company whose earnings are projected to explode tenfold over the next year – dangling a potential “10X gain” for investors shrewd enough to stake their claim now.

But here’s the best part of this stock-market story…

I’m talking about a company whose stock is trading at less than eight bucks a share.

That’s right – a $7 stock.

Welcome to the world – and the power – of low-priced stocks.

Not penny stocks. Not junk stocks.

But cheap stocks.

More specifically: Low-priced stocks, where the under-$10 share prices make it easy for you to grab big stakes – and where those big stakes can give you 10x gains on the stock and the same on your portfolio.

In yesterday’s Total Wealth, we outlined the very real “10X” allure of single-digit-sticker-price stocks – and even showed you how to find them.

Today we’re showing you one to buy…

The Game Wall Street Plays

Wall Street has an aversion to low-priced stocks.

Just look at the mega-mutual funds or the giant pools of capital run by hedge-fund gurus – where the top holdings are dominated by the triple-digit-priced shares of the mega-cap leaders.

The logic behind this strategy makes sense – or at least it does for big players, who focus fully on assets under management (AUM), overall fund performance, and the ability apply huge chunks of capital into big-cap stocks.

AUM is easy to understand: You collect fees on the money you manage; the more you manage, the more you make. From a fund standpoint, that leads to plenty of heft. And giant-sized funds up the ante when it comes to fund-performance: It takes a lot of shares to really “move the needle” and generate returns. That can steer the pros away from single-digit stocks – since those often are companies with very small market values _ and into those high-priced big-cap names.

I mean, owning 5% of a $200 million company will not make much of a difference in a $50 billion fund – especially one that’s chasing the biggest stock indices.

There’s also a perception of risk: Too many Wall Streeters associate stocks that trade for less than $10 with higher – even unacceptable – levels of risk.

There’s some good news hidden here.

Heck, I’d even call it great news for retail investors like you.

You can turn Wall Street’s aversion to cheap stocks into a massive competitive advantage.

I’m talking about an advantage that will allow you to trounce the pros.

Wall Street will also tell you that there is no difference between a stock jumping from $5 to $7 or one that surges from $50 to $70.

That’s true enough in theory – but not in real-world application.

Consider two companies – each with 1 million shares outstanding.

The shares of one company trade at $50. The other trades at $5.

And a mutual fund has embarked on a $1 million “shopping spree.”

A fund manager buying $1 million worth of the $50 stock can buy 20,000 shares, or 2% of the shares outstanding.

The same fund investing $1 million in that $5 stock can buy 200,000 shares – or a full 20% of the outstanding shares.

The purchase of 2% of a company’s total float isn’t a small thing by any means. But the purchase of 20% of a company’s total float will have a huge potential impact on that company’s stock price. That’s a significant portion of the total share count, and translates into substantially more buying pressure per dollar invested.

If we can identify sound companies whose shares are trading in the single digits – and do that before Wall Street catches on – and we can, the opportunities will be enormous. When the big funds finally notice these low-priced gems, after they’ve run-up above single-digits -the buying power they can deliver will give us windfalls that are three, five, seven or 10 times our original investment.

And the cheap-stock play we’re going to talk about now has just that kind of 10-x potential.

Washington’s Best Friend

The company I’m looking at here is PAE Inc. (NasdaqGS:PAE), a Falls Church, Virginia-based government contractor that has its hands in global security, infrastructure, outsourcing, construction, training and testing and even space services – every one of them a “front-burner” enterprise for the United States and its allies.

It’s a company that was spawned in the Cold War era, in 1955- when it was founded as Pacific Architects and Engineers, a California architecture-and-engineering firm helping Washington rebuild Asia following the Second World War.

Now known as PAE, the company today operates on every continent and in about 60 countries.

When Washington looks to set up an intelligence operation and needs a secure construction site, PAE is often the first choice. When it needs support for a federal data center, PAE is there. When it needs the physical “stuff” that makes border security possible, it looks to PAE.

And when it comes to space programs, the United States couldn’t function without PAE. The company supports the Johnson Space Center in Houston, the Kennedy Space Center in Merritt Island, Fla., rocket testing at the Stennis Space Center in Hancock County, Miss., and spacecraft assembly operations at Michoud Assembly Facility in New Orleans.

Here’s the real takeaway here: The U.S. government is a stalwart of any customer list. Over time, the federal government just keeps getting bigger – not smaller. And because it owns the monetary printing press, you’ll always get paid.

You need proof? Just look at earnings growth.

Earnings per share are projected to grow from seven cents a share in calendar 2019 to as much as 75 cents this year and a possible 94 cents in 2022 – better than a 10X jump.

What does that mean for a stock that’s currently trading just under $8?

Wall Street’s sell-side crowd has a 12-month consensus target of $14, with a high of $16 – a peak jump of more than 100% from where it’s trading right now.

But if PAE delivers on – or, better still, beats – those earnings, higher peaks are certainly possible.

That’s the allure of a cheap-stock strategy.

And PAE isn’t the only cheap-stock out there projected to make it big. And it’s not the only cheap-stock on my radar.

You may have heard me say this before, but we are on the cusp of a “wealth wipeout.” Politicians will call it a “capital shift,” and it certainly is… it’s a capital shift from your pockets into theirs.

So cheap-stocks are needed more than ever to keep you and your family on track while the government tries its best to syphon money from your paychecks into the biggest presidential spending spree I have ever seen.

If you make the right moves now, you will open the door to opportunities to protect your assets, preserve your income, and turn a profit.

Which is why I put together a special report full of stocks that could carry you to profits before the Biden Administration slams the window shut on your financial future.

Click here to get all the details.

Until next time,

Shah