Cheap Stocks for New Investors

In my opinion, this is an excellent time to be a brand-spanking-new investor. I'm a contrarian by nature -- just ask my wife -- and scouring the market for its "coldest" prospects (as opposed to its hottest) is a favorite pastime of mine. At present, it appears that investors seeking the kinds of stocks that can anchor a portfolio -- long-haul overachievers trading on the cheap -- are in luck.

For example, take the likes of ExxonMobil (NYSE: XOM), Morgan Stanley (NYSE: MS), and Merrill Lynch (NYSE: MER). Each of these big boys has bested the S&P 500 for the 10 years that ended with May, but thanks to the market's mysterious ways, all of 'em clock in with price-to-earnings ratios (P/Es) below that of the broader market.

That's also true of Capital One Financial (NYSE: COF) and Alcoa (NYSE: AA). Meanwhile, fellow market-beaters ACE (NYSE: ACE) and Toll Brothers currently run with single-digit P/Es.

What's the catch?
Make no mistake: Sometimes, even rock-solid companies trade for lengthy stretches of time with moribund multiples. None of the above are get-rich-quick prospects. "Get rich slowly" is more like it. But if you're a newbie investor, that should be your mantra anyway. Time, after all, is on your side.

Let's say you're a disciplined 30-year-old intent on retiring at 62, and you manage to sock away $10,000 per year. Depending on the lifestyle you want to lead in your retirement, you might be able to hit the proverbial back nine even sooner. Indeed, if your portfolio just grows at the market's annualized historical average of roughly 10.5%, you'll be a millionaire at 55. Keep kicking in the coin until you hit 60, and at that same rate of return, you'll have more than $1.8 million.

What if you're not so disciplined?
If you don't have 30 years -- or quite that much discipline -- financial independence can still be within reach. To achieve it, you'll want to beat the market's average, of course. And you'll need to manage your investments and personal finances effectively along the way.

On the former front, consider adding the aforementioned list of "cold" stocks to your further-research list. When you can buy that kind of quality on the cheap, after all, there's little reason to go fishing in more speculative waters for market-beating potential.