In my free weekly Total Wealth service, we’ve been talking about stocks that trade for less than 10 bucks a share, but have an outsize chance of returning multiples of the purchase price – 3X, 7X, even 10X the initial investment.
This extreme profit potential is possible because the stocks we’re talking about are keyed into unstoppable trends, backed by a flood of trillions in capital.
You’ll get the chance in a second to get into my free Total Wealth research and get all my picks, but today I’m going to name a stock that I’ve just got to share with everyone. It’s that big.
This company has real “10X” potential – what back in the day they used to call a “ten-bagger.”
My subscribers got the ticker last week, and they’ve already had the chance to book nearly 10% profits, because, as I expected, it’s come up nicely – especially since the president’s address to Congress on Wednesday night.
For the moment, shares can still be had for less than $9, but here’s why I don’t think that’ll be the case much longer…
Perfectly Positioned for Policy Priorities
It’s no coincidence this stock has seen a boost since the president laid out his argument for trillions in spending on infrastructure. It’s a company with a lock on government contracts across the globe, again, at just the moment Biden’s White House is looking to sink trillions into infrastructure. That’s one of the reasons why earnings are projected to rise tenfold over the next year – and that’s the key to 10X profit potential.
The company I’m looking at here is PAE Inc. (NASDAQ: PAE), a Falls Church, Va.–based government contractor that has its hands in global security, infrastructure, outsourcing, construction, training and testing, and even space services.
Each and every one of those is 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 in about 60 countries, on every continent.
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 the Space Program, 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: Uncle Sam is a fixture on PAE’s customer rolodex. Over time, the federal government just keeps getting bigger. Indeed, President Biden just went on national television to outline the biggest government expansion since Lyndon B. Johnson in the 1960s.
And because the government owns the monetary printing press, PAE – and, by extension, you – will always get paid.
For proof, look no further than earnings growth
Earnings per share are projected to grow from $0.07 a share in calendar 2019 to as much as $0.75 this year and a possible $0.94 in 2022 – that’s better than a 10X jump, and more like a 12X.
What does that mean for a stock that’s currently trading just under $8.80?
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. When you buy sound companies trading in the single digits, you’re exerting more buying pressure… and when Wall Street catches on, their buying pressure can take your investment 5X, 7X, 10X higher. I saw that very thing happen time and time again during the three decades-plus I spent on Wall Street.
— Shah Gilani
Source: Money Morning