Charles Payne’s “One stock to buy and hold FOREVER!”

By Travis Johnson, Stock Gumshoe, November 3, 2015

I’ve never looked at a teaser pitch from Charles Payne before, but this one about a “buy and hold forever” stock caught my eye.

Payne’s Smart Investing newsletter was started by Investorplace about six months ago as a way to capitalize, I expect, on his growing presence on Cable TV… you’ve probably seen him if you watch Fox Business — he hosts a show there and is apparently a frequent investing pundit for Fox News in general. He’s been a financial journalist/pundit for many years, and he also runs a website called Wall Street Strategies… before that, sez Wikipedia, he worked for E.F. Hutton. I’ve never seen his shows and don’t know his track record at all, that’s just the quick snippet of info I got for the “who is this guy” file.

More interestingly, Payne reportedly used to be a paid stock promoter, using his TV news job to validate his stock picking prowess in suggesting a few junk OTC penny stocks… a fact that he seems to try pretty hard to hide these days. He sent out a bunch of ads five or six years ago that, frankly, are among the types I hate the most: The ones where someone with a legitimate reputation or celebrity and a following and a real newsletter for which he charges a subscription fee also takes money from a promoter to push a specific stock even as he’s also trying to sell his own newsletter in the same ad, which seems to me an over-the-top variety of “double dipping.”

So that hasn’t made me overly excited about rushing into any stocks he touts, but, well, that was a long time ago and I haven’t seen anything like that from him in at least a few years… so shall we give him the benefit of the doubt?

Do note that “benefit of the doubt” for me here means that I accept that he used to get paid, at least indirectly, to disseminate glowing recommendations of individual junk stocks that were obviously terrible investment ideas, and that he’s seen the error of his ways, or had a long talk with the Fox News lawyers (who cut ties with Tobin Smith after his very similar ads for Petrosonic a few years ago), and doesn’t do that anymore… if I thought for a second that he actually really liked and honestly analyzed the stocks he suggested in those ad campaigns, like NXT Nutritionals, I’d say he’s just plain dumb and we should stop reading unless he’s somehow become more rational in the last few years (not impossible, I like to think that the mistakes I made a few years ago wouldn’t be repeated today). He seems to have used the “I actually liked the stock and this is my genuine analysis” defense in the past and in his disclaimers, so I guess what I’m really saying is that the only reason I’d pay any attention to him at all as a stock picker is that I think he was lying.

So that’s a “maybe” in the “benefit of the doubt” department. If he told me it wasn’t raining I’d still look out the window before leaving my umbrella at home.

But I’m at least curious about what this “secret stock” is that he’s touting. Me no like secrets, and Gumshoe readers are asking, so what’s the answer?

It’s promised as the subject of a “Special Report” in a recent email ad — the first part of the ad is all about how Nike (NKE) is his first “Forever Stock” and the first stock he recommended to subscribers of his Smart Investing newsletter when it launched earlier this year, and he goes on to explain why he considers NKE so fantastic — no great debate there, it’s obviously one of the more successful growth stocks in the US in recent decades, and not many investing pundits will come up with reasons to dislike that pick… other, perhaps, than folks who just think it’s a mite too expensive to buy.

His hope, then, is that if you think he was a smarty for suggesting NKE earlier this year, you’ll sign up for his newsletter ($199) to learn about his next forever stock. More from Payne:

“I hope that gives you the confidence to get a few shares of NIKE into your own portfolio just as soon as possible. Even better, I hope it demonstrates that when I recommend a stock to you, I’m willing to stand behind it.

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“Especially now that I’ve come across a second opportunity I believe can be every bit as profitable for patient long-term investors as NIKE has been for my clients and me.

“I’m so convinced of its potential, in fact, I’ve made it the subject of a brand new equity research report. Revealing my entire rationale for why it’s a perfect complement to your NIKE investment — and as near a ‘can’t miss’ investment as you’re likely to find.”

I’m trying really hard not to say something snarky in response to that “willing to stand behind it” bit. Something involving NXT Nutritionals (NXTH), perhaps, or Brainy Brands (TBBC). But I’m trying to let bygones be bygones… so let’s move on to see what his next “Forever” idea is.

“Smart Investing Special Report #1: ‘One stock to buy and hold FOREVER!’

“… the iconic U.S. company I’m recommending to my Charter Members as the perfect complement to their core NIKE positions….

“Like NIKE, shares of this company’s stock have been on a tear — more than tripling in value over the past five years. Also like NIKE, the story is far from over….

“For starters, the company is the single best pure play on an unstoppable long-term global trend that already drives a $1.5 trillion industry — a trend that nearly everyone agrees is poised to accelerate over the next decade.

“But there is much more to this remarkable company than a pure play on a broad, secular global trend.

“Even within the broader trend, this well-run, well-capitalized, and firmly entrenched industry leader stands out. As it continues to confound analyst expectations, consistently out-performing even the most ambitious earnings and revenue estimates.

“Which, frankly, is no surprise to me, given that it is hands-down, the crème of the crop in its highly profitable, ultra-high-tech segment. You need to at least consider getting a few shares into your own portfolio!

“Buy it today for near-term capital appreciation. Then sock it away for the next decade for more. Meanwhile, bank a generous 3% dividend yield each and every year. Then watch as your annual payout grows by DOUBLE DIGITS each year — just as it has in each of the past 13 years!”

So who is it? Well, that’s obviously not a lot of clues — but in the ad there was also a chart that Payne used to show how spectacularly this stock has performed over the past three years, so the Thinkolator needed but a few moments with that image to confirm that yes, this “Forever” stock is… Lockheed Martin (LMT).

If you’re into confirming stuff (which I always encourage), you can check this chart that I made at StockCharts.com against the one of the “secret” stock in his ad email…they’re essentially identical, except that he pulled his chart at midday on September 28, and I pulled mine using the closing price that day.

LMTchart

I’m not sure what Payne is hinting at with his “$1.5 trillion industry” — though that is the number often trotted out to describe the long-term cost of Lockheed’s F-35 Joint Strike Fighter program (usually accompanied by words like “mistake” or “boondoggle”).

So is Lockheed Martin worth your consideration? Well, sure… it’s the largest defense contractor on the planet, it’s very profitable and pays a dividend, and it’s been doing very well for a long time. The stock is perhaps a little expensive, and it has even jumped 10% or so since Payne’s chart was pulled about a month ago, but it’s a well-run large cap company with dividend growth and at least some diversification in their income streams — they are dependent on large government programs, like the new Littoral Combat ship and the F-35 fighter, but even the massive F-35 program only generates about 20% of their sales. And they are not a lot more expensive than their major competitors — Northrop Grumman (NOC) and Raytheon (RTN), for example, trade at similar valuations. Perhaps the best endorsement of the company is that they’ve lost out on two massive multi-billion-dollar defense contracts, for the Humvee replacement and the next stealth bomber, and they’re still doing fine.

The only thing that Lockheed really lacks is big top-line growth — they have been solid operationally for years, but revenues are only about 10% higher than they were a decade ago, and there may be a point at which they can’t really grow earnings very much without substantial new revenue. Over the last five years their earnings per share are up about 60%, but the stock is up 200% — which means that a rerating of the stock has already happened and this has moved from a stock that trades at a discount to a stock that trades at a premium to the overall market, investors have decided that it deserves a PE of 20 instead of PE of 10. That’s happened to all the big defense contractors in the recovery from the 2010 doldrums… and it’s not going to happen again, I’d guess — the PE ratio doubling from here, to 40, is very unlikely for a company of this size and without real scalable growth prospects, so it would be very surprising to see another 200% gain in the next five years. But a 50% gain, plus dividends, is certainly imaginable if the world continues to spend a bit more on military equipment and services each year.

Lockheed is in the middle of considering “strategic alternatives” for its government IT and missile systems divisions, so there will probably be some kind of news about that in the next few months that might includes sales or spinoffs — designed, one imagines, to help focus this increasingly brobdingnagian company on their strengths in aerospace and defense technology (among other things). They also should close on their acquisition of Sikorsky by the end of the week, so things are certainly changing pretty fast at Lockheed HQ in Bethesda.

LMT currently trades at a forward PE of about 18, and it’s going to be growing earnings (if analysts are to be believed) by only about 6-7% a year… so that’s not an ideal valuation, but it pays a 3% dividend (which they’ve raised annually for 12 years in a row, by at least 10% a year) and it’s not shockingly expensive for a blue chip company with some possible growth catalysts still out there (like their possible spinoffs, or whatever other next-generation technologies might eventually emerge from their skunkworks)… and as far as I know, the world is showing no current signs of massive cuts to military spending. I’d guess that the biggest near-term risk is probably political, since there are some programs, like the extraordinarily expensive F-35 Joint Strike Fighter, that make up big chunks of Lockheed’s revenue and could come under criticism… and there’s always the chance for more government budget battles that knock down the big defense contractors… but despite the criticism, these huge programs tend to keep rolling along and it’s pretty hard to imagine a world in which Lockheed Martin doesn’t get a huge share of defense spending.

Lockheed’s on a roll and it’s always more satisfying to buy “blue chip” companies when they’re beaten down and cheaper, since that provides some more margin of safety and some bragging rights, but it’s anyone’s guess as to whether the soundbites of this next crazy election cycle will bring a haircut to the defense stocks or make them surge even higher. I’d personally wait for a pullback on this one, but that’s how I felt a few months ago when I last looked at it, too, and I would therefore have missed some nice gains.

And you can say what you will about Charles Payne (and maybe I will, too), but his mostly generic “forever stock” pitch here for Lockheed Martin is, at least, less ridiculous than Kent Moors’ claim that Lockheed would be getting rich by selling graphene water filters (the stock is up since Moors touted it at $175 or so — but that’s not, of course, because of their early stage graphene research).

Just goes to show you, sometimes a decent investment emerges from a ridiculous, overhyped ad or a pundit of questionable ethics — yet more reason to keep reading these ridiculous ads, sifting through in the search for interesting ideas, and considering those stocks on their own merits.

Have any thoughts to share on Lockheed Martin, defense spending prospects, blue-chip dividend stocks, Charles Payne? All of the above? Let them loose by typing them into the friendly little comment box below — who knows, maybe your perspective will make us all a bit wiser.



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Deborah
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Deborah

I’m sure LMT is a good stock but as a very small investor [Trying to grow] I just can’t commit to an expensive stock like that with little growth prospects.We don’t even KNOW what the next administration is likely to spend or want to spend on Military so to me? I think I’ll pass unless it happens to be included in an eft I might look at. The point for me is I am making decent dividends almost as much per year on three ither stocks that have been cranking out growing dividend and have show growth. I wind up… Read More »

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klinkhamerjoop
Irregular
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klinkhamerjoop

So which stocks are these, pray?

Chuck P
Guest
Chuck P

I see Charles Payne on saturday mornings on the Fox News Network. Can’t remember which of the 4 shows he’s on but it doesn’t matter. I have paid attention to his picks over the years and have never been real impressed with his picks. But he is a nice guy!!!!!!

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gguy
Guest
gguy

It may be a ‘pittance’ but Lockheed lost the $55 billion long range bomber contract to Northrop Grumman – I wonder if it’s still hold forever?

suzanne derose
Guest
suzanne derose

I have NOC and probably will hold it forever. Dividend is1.69% and I have more than doubled my original investment. I had LMT but sold it a few years ago. Now I wish I held on to it. Both companies are good. Its dividend is nearly 3%.

audi4cc
Member
👍12

Hi Travis, LMT has a breakthrough technology and it has nothing to do with “The Industrial War Machine” that Presidents Truman, Eisenhower and Kennedy warned us about. It has to do with the desalinization of ocean water using filters made of Graphene! The Graphene filter is paper thin replacing the equivalent of today’s filter, which is 3 reams of paper (1500 sheets) thick. The Graphene filter is also 1000 x stronger and can filter at a much higher flow rate. The Pakistani and India governments are putting aside tens of billions of dollars for the purpose of spending it on… Read More »

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digitriper
Irregular
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digitriper

Travis actually reviewed a previous recommendation of LMT that was pointing out the potential of the graphene filters for desalinization. His point at the time was that even if they had the filter technology up and profitable it wouldn’t be a significant tick for the bottom line of this company. I own LMT and have been generally meh about it, but I am not selling it any time soon

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david cregar
Guest
david cregar

In defense it gencorp formerly gy on nyse whom incidentally is a match for the chart having run up from bit over $4 to bit over $21 past 5 yrs, after winning a contract to build a space rocket. Now AJRD, Aerojet rocketdyne (formerly GY) has been in business for over 100 yrs and once were spun off as General rubber and tire. Aerojet is mostly known for the helicopter. They do not pay a dividend. I think JFK was going to have the same rocket built but something about the federal reserve and it never happened. I dont know… Read More »

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mugshoe
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👍0
mugshoe

FLML was a very good pick. I just forgot to take profits at 26 at almost a double, still up but obviously no where near as much. I still like it though.

rubber
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👍46
rubber

Here is one in different field I would like to bring to readers attention. One I have been following for over 5 years that has finally got FDA approval. Under the radar stock usually with low volume which I think can be a 10 bagger from here. You must read full report on PR newswire to realize full potential. “INVO Bioscience, Inc. (OTC Pink: IVOB), a medical device company focused on treatment option for patients diagnosed with infertility, today announced that the U.S. Food and Drug Administration (FDA) has granted the Company’s de novo request for the INVOcell™. As a… Read More »

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gard
Guest

went from .43 to 1.25 in 2 days. Has 3 employees according to Yahoo, ceo, cfo, and president. I would short this if I could as it looks like a p&d, not necessarily by the company
but by outside stock owners possibly.

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evoda
Guest
evoda

observations:
1. you have never spent as many words to negatively critique a stock, plus
2. charles payne is a black man, plus
3. charles payne works for fox news, therefore i must assume
4. you are a hypocritical, leftwing bigoted racist

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rr2605
Member
👍3
rr2605

When someone writes or speaks critically about someone else you may or may not learn something useful about the subject of the criticism. You are guaranteed to learn something about the person doing the critique.

audi4cc
Member
👍12

Had I finished reading your entire article earlier I could have saved myself some writing! The Graphene filtering technology however is touted as having many applications and shows LMT diversifying into new fields. The Graphene filter technology supposedly filters particles at the 1 micron level and the technology can be used for dialysis vastly improving the capabilities of the machines of today.
I haven’t heard or read anything about LMT and Graphene filters since and I don’t own LMT but not opposed to buying as a forever stock based on the dividends.

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Tom K.
Guest
Tom K.

Thanks for the very informative article, Travis. Oh and BTW, brobdingnagian could be used to describe the late John Holmes……or as you have noted above to Lockheed Martin as well.

Michael T
Guest
Michael T

I believe Mr. Holmes preferred the term “girthy.” Brobdnignagian is such a mouthful.

who noze
Guest

my broker got me 5sh. of comsat at the opening price[[20]]its now lmt about 50sh also have nxt nutritional

Georgie
Guest
Georgie

Hello Travis. Thanks for your Gumshoe Newsletters which are always welcome and interesting to read. Biased or not ,they are your opinions in response mostly to people’s requests and it is saves me and many others paying a lot of Money to some dubious fly by night recommendations from various companies. Comments from 9 above ( not quite ‘adove’ but simple minded) just shows how far behind the rest of the world some American still are. Mention or not the word colour and it is the first reaction like this that results – get a life ‘little dove’. The world… Read More »

dcinvest
Irregular
👍39

Travis, my comments about your news letters that critique news letters is like, “A refreshing breeze to a stranded traveler on a desert island.” I have spent thousands of dollars on news letters. Most if not all impress the reader that they have found the sure and certain path to 1) receiving monthly checks that could impress even a lottery winner, 2) turn $10,000. into 100,000 before the end of 3 months, or 3) guarantee your retirement from your current job because his method (usually a male writer) you will never lose money and you can quit your boring job… Read More »

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james
Guest
james

This best stock to hold forever is a utility under $30. that pays a superior dividend.

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Pascal
Member
👍171
Pascal

Travis, thank you for your unbiased and thorough reporting that is saving us a lot of money! The today’s attacks are out of line.

SquarePeg
Guest
SquarePeg

Hello Travis…I am not a paid subscriber yet…but probably soon will be because your work has been most impressive to me in the short time I have been following you…just about a year. Now that may sound like long enough but I don’t believe in small sample sizes. As an Agora Financial lifetime subsciber it took me longer than that to actually pull the trigger on any of their editors reccomendations and, of all of them I find only a few worth my reading time. Interestingly enough, I see very few if any teaser pitches for those particular newsletters. Money… Read More »

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SquarePeg
Guest
SquarePeg

That last sentence should have read “Irregularity in my future”…oops

hagar
Guest
hagar

As was said above, Good on you Travis. I have followed some of Payne’s picks, and found them generally good. Did not even know he had a newsletter. My experience with newsletters is mediocre to bad. I do like Stansberry (some of them) because he does recommend using stop loss levels. Most newsletters do not. Anyway, keep up the good work.

Pepe Marrero
Guest
Pepe Marrero

Congrats, Mr. Travis. You have a lot of gumption to write in your ‘tell it how I see it’ style. Your columns are my favorite reading since I gave up reading the fiction papers (or novels) that most investment counsellors churn out every so often. I once made the mistake (it was a learning experience) to subscribe to one of those (“something berry”) and every staff member asked me to subscribe to their individual literary output. Unsubscribing to the original publication was a nightmare as they had my card number and the renewals were automatic. So, now I never sign… Read More »

FRANKLIN
Guest

I AM AN OLD WHITE GUY, LAWYER, THAT JUST TURNED 83. BLACK’S THAT GET IN TROUBLE ALWAYS USE THE RACE CARD. I THINK WE ARE ALL EQUAL, AND SHOULD NOT BE TREATED ANY DIFFERENT. ITS A SHAME TO SEE ANYONE USING BAD LANGUAGE. EVODA, MOVE ON AND GET A LIFE.

Stick
Guest
Stick

I’ve watched Payne’s show, “Making Money” quite a bit. I generally like his manor of presentation, but I wasn’t aware of his past. However, lately his show has morphed into a general news show concentrating on political and current events with less discussion of financial, investment and economic content which are already thoroughly covered by FOX News (Payne is on FOX Business). I may stop watching.

who noze
Guest

i guess im a forever holder of lmt since my five sh of comsat was taken over by lockheed and now have 50sh of lmt

herman medow
Guest

this is non sequiter, but have you any columns about SRPs-supposedly kind of
retirement plans?

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herman medow
Guest

mailing from this outfit- have you reviewed these folks?

Lorkuus1
Guest
Lorkuus1

Although Charles Payne seems to be the topic of the night, I think the Graphene angle is more interesting. I have had ZENYF, for too long, hoping that cheap 99.9% purity graphite almost straight from the ground would have the stock take off. They have lots of research on their product going on.

I did subscribe to Charles long ago but never made any money.

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Phil Ryan
Guest
Phil Ryan

There’re only a few stocks I would view as forever, i.e. Proctor and Gamble or Google or maybe even Amazon. But, there really is no such thing as a forever stock because we just cannot see what the future will bring to these “apparently” invulnerable companies with such wide moats. So really, we’re just talking about holding some stocks longer than others. Too, I’m always amused by the unnamed stock that will be the next Netflix and will be revealed upon your subscription to …

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Mike
Guest
Mike

I threw half of 2013 away on charles payne’s “flagship service”. Total waste! I don’t think he would know a good stock if it jumped out & bit him. I still watch fox, but not when he’s on. The only thing he & his are interested in are keeping the subscription fees coming in.

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