Man who never lost money

How a simple investment strategy inspired by farming made a killing. My Womack, who never lost money in stock market.

Introduction

John Train famous journalist in his article in Forbes magazine in Oct 02’1978 edition shared an interesting story about the rice farmer, who never lost the money in stock market. Interestingly, this story was shared with him by one of his reader Melvid Hogan of Houstan, US.

Melvid, a loser in stock investing

Melvid Hogan a World War II veteran, started investing as a hobby and had a net loss year after year in stock market. One day he met Womack in Merrill Lynch office. Womack, a rice farmer who never lost the money in stock market shared an winning strategy to him. And, he had been making a profit ever since.

Womack’s Holy Grail

Mr. Womack shared -

“When during a bear market he would read in the papers that the market was down to new lows and the experts were predicting that it was sure to drop another 200 points in the Dow, the farmer would look through a Standard & Poor’s Stock Guide and select around 30 stocks that had fallen in price below $10 - solid, profit-making, unheard-of little companies (pecan growers, home furnishings, etc.) and paid dividends. He would come to Houston and buy a $25,000 package of them.”

“And then, one, two, three or four years later, when the stock market was bubbling and the prophets were talking about the Dow hitting 1500, he would come to town and sell his whole package.”

Winning Strategy

Womack idea was simple buy low and sell high. He had a common sense that when there is a fear, there is misjudgment and Mr. Market would provide the opportunities to buy the good quality, low/no debt and cash rich companies at dearth cheap prices.

In general, he took ‘a farming approach’ to stock market. Like a planting season and harvest season, there is a buying season and there is selling season.

Buy when there is a fear and sell when there is greed.

Original Article