At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
In investing, as it war, we find it most profitable to "pick our battles." There's little sense in making a frontal attack on a fortified position when you can flank. And there's no need to buy an expensive stock today, if you can wait just 24 hours and get it for cheaper.

Which is precisely what JP Morgan did today. Seeing Lockheed Martin (NYSE:LMT) positioned as the world's leading defense contractor, and recognizing its value as owner of the first trillion-dollar warplane, JP knew Lockheed was a "buy." But the analyst cannily bided its time, waited until Lockheed had reported lower profits, and ... got into the stock at an 8.5% discount this morning.

Was that smart?
Fair question. Recommending the purchase of a stock that just reported a 17% decline in profits with declining gross margins may not seem like the smartest move. Toss in the fact that Congress just voted to wipe out $1.75 billion in funding for Lockheed's F-22 Raptor fighter jet, and you might expect investors to be downright gloomy on the company's prospects.

But JP Morgan's anything but gloomy about Lockheed's prospects, and based on this banker's record, I suspect that's great news for Lockheed shareholders. Over the three years that we've tracked JP Morgan's recommendations, we've seen this analyst amass an astounding record of 71% accuracy in the defense industry. Despite occasional stumbles with the likes of Taser (NASDAQ:TASR) and Northrop Grumman (NYSE:NOC), JP has rumbled to victory on the backs of such recommendations as:


JP Says


JP's Picks Beating S&P By

Precision Castparts  (NYSE:PCP)



51 points

Raytheon (NYSE:RTN)



37 points (two picks)

Axsys Technologies (NASDAQ:AXYS)



34 points (two picks)

Rockwell Collins  (NYSE:COL)



7 points

And on Lockheed itself? Prior to this morning's upgrade, JP Morgan last took an affirmative buy/sell position on Lockheed in February 2007. That recommendation (to sell the stock) beat the market by 10 percentage points.

Which goes to show you as well that JP is no starry-eyed fan of Lockheed. JP is quite willing to recommend selling the stock -- when the numbers require it. It's just that right now, with Lockheed tapped as: "the prime contractor for the F-35 -- the largest defense program in history -- which is set for a sharp revenue ramp as it moves from development to production," is not the time to sell Lockheed.

And it's not just JP Morgan saying that, either. Fact is, I have written multiple times in this space about why I think Lockheed Martin is a "buy."

Valuation-wise, the stock sells for less than a 10 P/E despite long-term growth estimates approaching 11%. Cash generation remains strong despite last quarter's decline in reported "earnings," with Lockheed predicting it will produce in excess of $4.1 billion in operating cash flow this year. Capital expenditures seem well in hand, on course to approximate $600 million this year -- in which case, the company could well generate significantly more cash profit than it reports as "earnings" by year end.

Foolish takeaway
All of which are reasons why I placed Lockheed on my select team of "6 Stocks that Never Surrender" earlier this month. And all of which are reasons I believe JP Morgan is 100% right about Lockheed today.

This stock's a winner.

Fool contributor Rich Smith owns shares of Nokia. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 738 out of more than 135,000 members. Precision Castparts is a Motley Fool Stock Advisor pick. Rockwell Collins is a Motley Fool Inside Value selection. The Fool's disclosure policy will never out-flank you.