Terrific Bargains 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 form the foundation of a portfolio -- long-haul overachievers trading on the cheap -- are in luck.

Take, for example, IBM (NYSE: IBM  ) , Transocean (NYSE: RIG  ) , Target (NYSE: TGT  ) , and Occidental Petroleum (NYSE: OXY  ) . Each of these big boys has bested the S&P 500 for the 10 years that ended with October, but thanks to the market's mysterious ways, all of 'em clock in with trailing price-to-earnings ratios (P/Es) below that of the broader market. Indeed, each currently runs with a single-digit P/E, despite track records of delivering superior returns for investors.

That's also true of fellow long-haul market-beaters UnitedHealth (NYSE: UNH  ) , Devon Energy (NYSE: DVN  ) , and Caterpillar (NYSE: CAT  ) .

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 is a get-rich-quick prospect. "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. 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. On that 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, there's little reason to go fishing in more speculative waters for market-beating potential.

And if you're looking for solidly profitable companies that haven't yet achieved the household-name status of those called out above -- and whose forward-looking prospects appear even brighter to us -- consider taking the Fool's Ready Made Millionaire service for a spin. At RMM, we've designed a set-and-forget portfolio of stocks, funds, and a high-octane ETF that we think has what it takes to trounce the market over the next three to five years and beyond. We've taken our lumps in the early going, but we stand behind our lineup. Indeed, the Fool has a million bucks of its own money plunked down on the portfolio.

RMM will reopen to new members early next year. In the meantime, you can learn more about the service -- and snag a free copy of our “11-Minute Millionaire“ special report -- just by clicking here.

This article was originally published on Jan. 18, 2007. It has been updated.

Shannon Zimmerman runs point on the Fool's Ready Made Millionaire service. Shannon doesn't own any of the securities mentioned. UnitedHealth is a Motley Fool Stock Advisor and Inside Value recommendation, and The Motley Fool owns shares. You can check out the Fool's strict disclosure policy by clicking right here.


Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 780168, ~/Articles/ArticleHandler.aspx, 10/25/2014 2:05:51 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement