Start the conversation
One of my all-time favorites is a perfect example: Lending Tree Inc. (NASDAQ: TREE). This is a $3 billion fintech juggernaut; it's a household name, advertised at all hours, and just one share will set you back $218.
Of course, it didn't start out that way. There was a time when it had a microscopic market cap of $60 million and shares could be had for $5.50 or less.
It's given investors a total return of 3,800%. String a few of those 20X and 30X winners together, and before you know it, you're rolling in it.
I've found a stock that's perfect to get you started. My most conservative projections here point to more than 6X the gains, but ultimately, this stock could very well return investors' money more than 19 times over.
As if that weren't enough, the board is currently paying shareholders more than 4% in dividends…
The Best Cheap Stocks Have This in Common
Way too many investors read "cheap" and think "trash." As Lending Tree stock proves, that assumption is a big mistake. Far from being trash, the best cheap stocks are more like solid gold.
A stock's risk has nothing to do with its price; the risk is related to the strength or weakness of the underlying business, to its revenue, profits, cash flow, financial reserves, debt, and most importantly, its long-term prospects.
Those risks are reflected by the company's share-price valuation, and many lower-priced – "cheap" – stocks have fantastic businesses that generate robust, increasing cash flows.
That spigot of extra cash presents those companies with lots of options. That money can be reinvested in the business, stepping up marketing for existing products, research and design (R&D), or making acquisitions to boost market share. Extra cash can be used as a de facto stock-price booster, via stock buybacks that boost the all-important earnings-per-share (EPS) metric;
REVEALED: These Five Stocks Are Entering Hyperdrive...and the Returns Can Be Astronomical. See them here.
Or, one of my favorite boardroom strategies, those funds can flow directly to shareholders' pockets in the form of dividend payouts. These are companies whose execs are essentially telling investors: "We're generating more than enough cash to pay the bills and grow the business. We have money left over, and we're using it to reward the most important people in our world – our shareholders."
You've got to be careful with your dividend choices – you want a "sustainable" dividend, one which you're confident the company can cover out of cash flow without leaving itself cash-strapped.
That's the kind of stock I'm going to name today: A sustainable dividend on a stock trading for less than $10 that pays shareholders in a consistent, sustainable way on the way to higher and higher share prices.
This is the ultimate cheap stock.
This Housing-Boom Star Ticks All the Boxes
The company is UWM Holdings Corp. (NYSE: UWMC), a wholesale-mortgage firm and a textbook example of a low-priced stock with a great dividend and a bright future.
It has the right business model; it provides funding to mortgage brokers as opposed to consumers. UWM underwrites and provides closing documentation and then funds residential mortgage loans originated by independent mortgage brokers, correspondents, small banks, and local credit unions.
Back in January, UWM Holdings just went public via a merger with a special purpose acquisition company (SPAC) – a "New Age IPO" vehicle I told my readers about earlier this year.
That said, even though UWM is newly arrived to the public markets, it's been around the block a few times; UWM Holdings is the parent of United Wholesale Mortgage, which has been in business since 1986.
The truth is UWM is as much a tech story as it is a mortgage story. The company develops most of the technology it uses to underwrite and process loans easier and more efficiently. UWM's platforms make it possible for its commercial customers to build, brand, and service their own mortgage offerings.
For the past six years, that company has been the largest wholesale mortgage lender in a U.S. market that's getting hotter virtually by the hour; most analysts don't see it ending anytime soon.
That makes the housing boom one of the single most powerful profit trends there is right now, and UWM is wired in tight.
The numbers are mouthwatering…
UWM controlled 34% of the wholesale mortgage market last year. Current forecasts call for that market share figure to hit 50% by 2026, when the wholesale channel is projected to be worth $685 billion – nearly 90% higher than it is today.
Wall Street's consensus forecast is for EPS to grow almost 80% a year for each of the next five years. That kind of growth could send this stock right into the stratosphere.
And it's available right now for $9.09 a share.
If those earnings forecasts prove out, and the shares moved in lockstep, you'd be talking about a stock price of $185 a share five years from now – better than a 1,935% return, not including dividends. Even if the stock did just one-third of that – hitting $60 – you'd be looking at a 560% gain.
And frankly, no matter what price UWM hits – or how long it takes to get there – you'll be well-paid to wait. Right now, shares of UWM Holdings pay a quarterly dividend of $0.10 each, or $0.40 a year.
At a recent share price of $9.10, that's a dividend yield of nearly 4.4%.
That's a no-brainer in a world where 10-year U.S. Treasury is yielding 1.4%. You'd earn more than three times the market rate while you wait for UWM shares to hit $60 – and quite likely far beyond that.
Having a company pay you – and pay you well – while you're waiting to make a fortune on its stock is about the best deal you can get.
And when that pay-while-you-own-it stock can be bought for less than 10 bucks a share – well, that really is the ultimate cheap stock.
Now, I want to tell you about five other small stocks I'm watching right now. I'm expecting impressive potential from them, too.
I'm predicting a $353 billion tsunami of capital is headed straight for these five stocks, and I'm looking at some of the most impressive 12- and 18-month share price projections I've ever seen. Click here to take a look…