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.

“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.

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.