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Recently, SA reader Woody Hamilton asked me about which stocks I would buy for the next 5-10 years. That is a pretty hard question to answer. I usually try to buy cheap stocks with low P/E ratios. I am not looking for speculative gains, but a modest capital gain of 15%-20% is more than enough for my portfolio.

I consider dividends as a nifty bonus for shareholders. Historically, the stock market's annual return has been 11%. Therefore, any return higher than 11% is a success for me. Since we are talking about long periods of time, diversification is essential. In fact, diversification is the optimal investment strategy, according to the modern portfolio theory.

Here, is a diversified list of 11 stock picks for the next 11 years. I have analyzed these stocks from a fundamental perspective, adding my O-Metrix grading system and FED+ fair value estimates when applicable:

Apple (NASDAQ:AAPL) is a must have for the ultimate retirement portfolio. I was on the bearish side of Apple when the stock was trading at trailing P/E ratios of above 20. I was also thinking that analysts EPS estimates were too bullish. However, after the earnings confirmed analyst expectations, I changed my stance on Apple. The stock is trading with its historical low P/E of 15.56, and a forward P/E ratio of 12.19.

Its PEG ratio of 0.79 is below the historical norm. It has an O-Metrix score of 7.52, Apple is the center of innovation and its management surely knows how to transform the innovation into profit. I expect around 20% - 25% annualized return from Apple for the next decade. Apple is the most likely candidate to reach the trillion dollar market cap.

Microsoft (NASDAQ:MSFT) is one of the most-hated stocks on the market. There is a wide belief that the company became a dying dinosaur that is losing the competition against Apple. It is true that Apple is the biggest winner in almost any area it is involved in. However, Microsoft's primary business, the Office Package and Windows Operating Systems are doing fine.

The past 5-year annualized EPS growth of 17.63% is a strong signal, suggesting that the company is doing just fine. Why the stock is not going anywhere? The problem is the share dilution by management. It will probably take years for Bill Gates and Steve Ballmer to unload their shares. Nevertheless with an O-Metrix score of 7.26, Microsoft is a safe stock to invest in.

Intel (NASDAQ:INTC) is one of the cheapest technology stocks in the market with a trailing P/E ratio of 9.88, and a forward P/E ratio of 8.83. Its O-Metrix score of 7.75 is well above the average. Intel offers a yield of 3.9%. The company does not have debt issues. Debt to equity ratio is 0.04.

Besides being the world's largest microchip producer, Intel is also an investor in technology companies through Intel Capital. I think Intel is a safe investment as long as its P/E ratio stays below 20. Which means that I see almost 100% upside potential in the long-term.

AT&T (NYSE:T), the telecom giant, is also in my buy at dip list. I am not expecting AT&T to provide speculative returns, but with a yield of 6%, AT&T will surely return higher than government bonds. Besides, the stock is trading with a low trailing P/E ratio of 8.65, and forward P/E ratio of 11.24. Even with a low EPS growth estimate of 6%, with an O-Metrix score of 6, AT&T will provide safe dividends.

It does not matter whether bthe Department of Justice wins the legal case against AT&T or not. The stock has been an out-performer for the last 5 years, and I expect it to be an out-performer for the next 5 years, as well.

Philip Morris (NYSE:PM), a Jim Cramer favorite, recently increased its quarterly dividend to $0.77 per share. While the trailing yield is 3.79%, the projected dividend yield is close to 4.7%. That is a very nice move for the dividend lovers.

As Stephen Rosenman suggests, it is a company policy to have a dividend payout of 65%. The stock has a trailing P/E ratio of 15.63, and a forward P/E ratio of 13.08. Analysts estimate 12% EPS growth for the next 5 years.

If their estimates hold, dividends will also increase by the same amount in the next 5 years. With an O-Metrix score of 5.45, Philip Morris is fairly-priced.

I think McDonald's (NYSE:MCD) is a must have for the ultimate retirement portfolio. It is the largest fast food chain in the world, operating in more than 117 countries. The company has one of the strongest brand images in the world. It is growing at a rapid pace in developing countries, particularly China, Eastern Europe and the ex-Soviet Union States.

McDonald’s is an immensely profitable company with an operating margin of 31%, which is significantly higher than the industry average of 18%. Net profit margin of 20.6% is almost twice the industry average. Thanks to its increasing profitability, as of September 16th, McDonald's year-to-date return was 17.32%. The stock has a low-Beta value of 0.5.

While the closing price of $88 is slightly higher than my fair-value estimate of $83, I am keeping an eye on the stock. It is a stock to buy whenever it falls below its fair value.

Annaly Capital Management (NYSE:NLY) is one of the best managed mortgage REITs in the market. New-York headquartered Annaly engages in the ownership, management, and financing of a portfolio of investment securities. As a real estate investment trust, Annaly does not pay corporate taxes as long as its dividend payout ratio is higher than 90%.

Since its inception, the company paid $6 billion in dividends to its shareholders. Annaly invests in mortgage-backed securities, financed by short-term borrowing. As long as arbitrage opportunities exist between long-term lending and short-term borrowing, Annaly's business model will keep working.

The stock is trading with a low trailing P/E ratio of 6.27 and offers a yield of 14.5%. I am not sure whether the company can keep its yield as such, but it will surely be a good diversification in a portfolio.

I think if you are a believer in the recovery (which I am), you should own at least one automotive stock. I will go with Ford (NYSE:F) since it has stronger financials than General Motors (NYSE:GM). Since its dip in 2009, the stock made a strong recovery, rising up to $18 from $2.

Nevertheless, it was affected from the recent sell-off, losing almost 38% since January. The stock has a low trailing P/E ratio of 6.33 and a forward P/E ratio of 5.87. With an O-Metrix score of 6.38, Ford can be an out-performer.

If the company disintegrates itself, the parts will probably be worth much more than its current market cap of $40 billion.

Among the financials, I think AFLAC (NYSE:AFL) is a good pick for the long-run. Columbus-based American Family Life Assurance Company, incorporated in 1973, provides insurance and management services, and operates in Japan and the United States. It sells several types of health insurance like cancer plans, general medical expense plans and care plans.

AFLAC has serious presence in the Japanese market, and probably will incur long-term losses in the aftermath of the earthquake and tsunami. However, I think the market over-reacted. The stock lost 35% since January, and is trading 40% lower than its 52-week high.

AFLAC increased its dividends by almost 6-fold in the last 10 years. I expect this trend to continue in the long-run.

Wal-Mart (NYSE:WMT) is also a great company trading at a significant discount. Wal-Mart is the largest retailer in the world, operating in several countries. The company’s US segment operates through discount stores, super-centers, as well as walmart.com. With more than $400 billion of annual revenues, Wal-Mart has an unmatched scale in the retail business.

The brand image combined with the large economies of scale offers Wal-Mart a great competitive edge over relatively smaller retailers. The company sports a ttm [trailing twelve month] P/E ratio of 11.88 and a forward P/E ratio of 10.75.

My FED+ Fair value range for Wal-Mart is $70 - $88. If analysts EPS growth estimate of 11% holds, with an O-Metrix score of 6.25, Wal-Mart can be a market-beater.

Finally, I think Sirius XM (NASDAQ:SIRI) can be added for diversification, as well as, speculation purposes. After all, a portfolio that has only the blue chip names would have been pretty boring.

As of September 16, Sirius XM was trading at $1.83 with a 52-week range of $0.95 – $2.44. It has a market cap of $7.27 billion. The 3-year annualized revenue growth stands at 45.1%. Operating margin is 18.9%, and net profit margin is 8.1%. The company recently reaffirmed its 2011 guidance. Revenue is expected to grow by 10% and adjusted EBITDA is expected to grow by 20% in 2011.

It is not a buy and hold type of stock. However, one can make some good profits by buying at dips, and selling at peaks.

Source: 11 Stocks To Accumulate For The Next 11 Years