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This Farmer Is the Greatest Investor You’ve Never Heard of: What You Can Learn from Him

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There was once a farmer named Mr. Womack who may be one of the greatest investors you have never heard of. Let me tell you his story.

People first came to know about Womack back in 1978 when John Train, a money manager, wrote an article for Fortune magazine. In his 60 years of investing, Womack never had a loss on balance. His investing technique was straight-forward. Wrote John Train:

“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 S&P Stock Guide and select around 30 stocks that had fallen in price below $10—solid, profit making, unheard of 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. It was as simple as that.”

Being a farmer, Womack likened buying shares to buying pigs. The cheaper he could buy the pigs when the pork market was down, the higher his profits would be when the market recovered. Warren Buffett would be very proud of Womack; the former has a famous quote that goes, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful”.

During the most recent financial crisis between 2007 and 2009, “solid, profit-making” blue-chip companies with competitive advantages such as SIA Engineering Company (SGX: S59), Singapore Exchange (SGX: S68), and Keppel Corporation (SGX: BN4) could be bought for as low as $1, $3, and $2 respectively. Five years on since 2009, all the companies have recovered from their troughs to deliver returns of between 100% and 450%, excluding dividends.

We will never know how low any share can reach during a market crash. But neither did Womack know when a share would peak or reach its bottom – he was just happy enough to “buy or sell in the bottom or top range of its fluctuations”.

You may ask how does one have the mental fortitude to buy companies during a market crash? Mental fortitude can be cultivated by developing in-depth knowledge about a company’s business fundamentals and its management. If the market price is too low in relation to the growth potential of the company, then the business may be a good buy.

So, the next time a financial meltdown occurs (it will, the only question is when), do remember Mr. Womack’s story.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.