4 cheap stocks I’d buy with $10,000

With the S&P / ASX 200 Index (index: ^AXJO) (ASX: XJO) sinking 1.2% by lunchtime today, picking up cheaper stocks and taking advantage of the selloff could be a great idea.

There’s no guarantee that the sharemarket will recover next week though, and could fall even further, so we don’t want to invest in highly risky, speculative stocks. If the companies we select pay a dividend, then that’s a bonus.

So, without further ado, here are four cheap ideas…

Select Harvests Limited (ASX: SHV)

Currently trading on a prospective P/E ratio of 10x, the almond producer and nut processor also pays a trailing 3.9% fully franked dividend. With 80% of product exported, a lower Australian dollar would prove to be a huge boost to earnings. Select Harvests will also benefit from demand for almonds rising above supply for the first time in many years. Additionally, Select Harvests produces almonds counter-cyclically to the major Northern Hemisphere almond regions.

Insurance Australia Group Limited (ASX: IAG)

One of Australia’s most well-known insurers with brands like NRMA, CGU, Swan insurance and SGIO, IAG pays a fully franked yield of 5.8%, and recently upgraded its full year insurance margin for the fifth consecutive time. Growth should come from the recently acquired Wesfarmers insurance underwriting business, as well as relatively benign weather events. According to Commsec, IAG is currently trading on a P/E ratio of just 11.3.

Maca Limited (ASX: MLD)

Maca provides mining and crushing services to iron ore and gold companies, as well as civil construction projects. The company expects to report a net profit after tax of more than $49.5 million for the 2014 financial year, placing it on a P/E ratio of less than 7, and paying a fully franked dividend yield of over 6%. Maca is also holding $167 million in cash and investments, around half its market cap.

Challenger Limited (ASX: CGF)

Australia’s largest annuities provider to retirees also has a growing funds management business. Commsec forecasts put the company on a prospective P/E ratio of 12.8 for trhe 2015 financial year. While the financial services company only pays a 2.9% unfranked dividend, it is hugely leveraged to Australia’s ageing population, and has returned an average of 17% per year to shareholders over the past 10 years.

Those 4 stocks could set you on your way to making $1 million...

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned (but is definitely considering a number of them). You can follow Mike on Twitter @TMFKinga

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