Contrarian Investing: The Story of Mr Womack, the Pig Farmer

“Mr Womack the Pig Farmer” is my top investment philosophy

The man never had a loss on balance in 60 years.

His technique was the ultimate in simplicity. 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.

He equated buying stocks with buying a truckload of pigs. The lower he could buy the pigs, when the pork market was depressed, the more profit he would make when the next seller’s market would come along. He claimed that he would rather buy stocks under such conditions than pigs because pigs did not pay a dividend. You must feed pigs.

He took “a farming” approach to the stock market in general. In rice farming, there is a planting season and a harvesting season, in his stock purchases and sales he strictly observed the seasons.

Mr. Womack never seemed to buy stock at its bottom or sell it at its top. He seemed happy to buy or sell in the bottom or top range of its fluctuations. He had no regard whatsoever for the cliché’—Never send Good Money After Bad—when he was buying. For example, when the bottom fell out of the market of 1970, he added another $25,000 to his previous bargain price positions and made a virtual killing on the whole package.

I suppose that a modern stock market technician (on CNBC) could have found a lot of alphas, betas, contrary opinions and other theories in Mr. Womack’s simple approach to buying and selling stocks. But none I know put the emphasis on “buy price” that he did.

I realize that many things determine if a stock is a wise buy. But I have learned that during a depressed stock market, if you can get a cost position in a stock’s bottom price range it will forgive a multitude of misjudgments later.

During a market rise, you can sell too soon and make a profit, sell at the top and make a very good profit. So, with so many profit probabilities in your favor, the best cost price possible is worth waiting for.

Knowing this is always comforting during a depressed market, when a “chartist” looks at you with alarm after you buy on his latest “sell signal.”

In sum, Mr. Womack didn’t make anything complicated out of the stock market. He taught me that you can’t be buying stocks every day, week or month of the year and make a profit, any more than you could plant rice every day, week or month and make a crop. He changed my investing lifestyle and I have made a profit ever since.

From John Train‘s, The Craft of Investing.

The longer your time view, the easier the practice of contrarian investing

The art of waiting for the large sentiment swings. Waiting on the market does not come naturally to investment professionals

Set your own rules, don’t be influenced by market volatility.

First Year Anniversary for

Exactly one year ago, the team spent a white night launching their baby. And as one of the proud parents, I insist on showing you a video of Jon Elosegui and his team installing the first server.

Thirty servers and over ten Gbits of bandwidth later, we are approaching 10 million unique users a month. The team has hit the perfect viral storm, check out the traffic graph below.

The systems department has responded heroically. Even though it occasionally came down to me driving a van full of servers to our London datacenter, capacity has always been ahead of the viral whirlwind’s demand. Nobody says incubating is easy.

Not to be outdone, the Sales team has sold its first major brand campaign for Nokia. Unlike straight banners on the site, video overlays have great impact on viewers. Given its similarity with TV advertising, clients and agencies are rapidly accepting the format. All good news on the profit & loss side. It is all looking good for a great second year.

Happy birthday and congratulations to Jon, Felix and company. Have a great second year. Breaks into the Top 100 in Mexico

spanish free - video gratis

Free video site traffic keeps on growing. It has broken into the top 100 sites for Mexico, according to Alexa Ratings. It is number two video site after youtube.

Talking with the team reminds me that “When you grab a tiger by the tail, it is all about hanging on. Fortunately, the hispavista team has ten years experience of launching and sustaining online services; it is not their first time.

tutv traffic traffic accoding to Alexa Ranking

Nevertheless, feeding the beast is a challenge. Video sites are resource hungry projects, and the team needs to exercise ingenuity and flair in maintaining the service. It is a good thing the company has an engineering and technical background.

[Disclosure: We are invested in] Breaks the Top 100 in the Alexa Rankings

spanish free - video gratis

Free video site is in the throes of viral uptake. Since launch Christmas, traffic has grown to millions of unique users a month.The service is currently the number two free video service in Spain, behind alexa rank graph

The Alexa service ranks number 88 in the its Spanish Top 100 list for today. Following its current trend, it will enter the top 50 by the end of the month. A look at the traffic graphs shows the doubling period is around a month; a worthy contender in the list of present day web2.0 success stories.

Jon Elosegui, head of innovation, is no stranger to viral growth; with half a dozen viral growth services to his credit in the 1990s and early 2000, he has detailed insight into how to create a thriving online communities. One of his salient themes is that it is about the product, not the promotion. The service has had little uptake in the mainstream press, or among the blogosphere elite, the A-listers. Viral marketing has other vectors with which to access the target internet users.

When you have a hit product, promotion is often not necessary, and sometimes undesirable. The world is getting smaller. In the rush to improve the product and infrastructure in the face of ferocious uptake, marketing must take a backseat.

The innovation team is currently incubating new projects. You will see no press release, nor blogosphere comment on launch. Just straight launch into the young spanish internet user segment. A somewhat perplexing view of PR and “how to influence internet users”, but you cannot argue with the traffic numbers.

[Disclosure: We are invested in]

Google Developer Day London


Chris Dibona keynoting Google Developer day in London. Open Source program manager at Google, Chris is ambassador at large among the Open Source and Free Software community. He is in charge of the Google’s summer of code program, and also the legal framework of licenses under which the Google releases and uses FOSS code.

As expected, the Semantic Web (with capitals) came up during Questions & Answers; Chris is candid regarding the intellectual ambition and scope of SW, and is skeptical of its practical application and adoption among web developers. Given the volume of content and wide-ranging approaches to developing the web, he thinks standards will evolve organically rather than be dictated top-down. A widely held view considering Tim Berners-Lee’s difficulty in forging concensus even within working groups at the W3C.

Google Maps Platform

Ed Parsons, Andrew Eland and Peter Birch, geo-spatial technologists, gave a sweeping view of the geographic data in corporate networks and User-Generated data waiting to be collected and exploited. Excellent work integrating Google Earth and Google maps through KML files, the new standard for encapsulating geographic and viewing data together with the multimedia information.

Mapplet is the term for Google map widgets. A mapplet deploys data and functionality on a users’ Google map. Users can submit and select mapplets from Google’s mapplet open directory. The same as Google gadgets. Google Maps is fast becoming the platform to render and present geographic multimedia information AND functionality. With 200m downloads of Google earth and the strong Open Standards emphasis, the commons community seems to be adopting the platform rapidly.

Google Maps Mashups

Mike Astle, from online estate-agent Nestoria, was forthcoming about working and organizing a Google mashup company. Nestoria’s added value is geo-locating and processing estate agent information, either scraped or XML fed, onto Google Maps. Mashup business models are inherently fragile, as they depend on the whims of Google’s rapidly evolving Map/Mymap/Mapplet platform, and Mike sternly fielded the inevitable questions during the Q&A.

Whether Google’s creative commons ecosystem can also support businesses is still an open question. Only a few of the 50,000 Google mashups have revenues at present. Tellingly, Nestoria has built a buffer interface to Google maps, so as to allow swapping it out for Yahoo’s map service.

Google Developer Day

Google Mobile Search

Gummi Hafsteinsson described the ease with which mobile web can be developed nowadays. The new converging xhtml standards allow a KEEP IT SIMPLE approach which eases targeting a particular mobile device/mobile user for a particular service. Google’s mobile index is becoming the focus of conversation, as it is central for accessing mobile internet users. Gummi described how the newly relaunched index combines so-called transcoded and true mobile web sites to provide optimum results for the mobile user.

Google Gears

The big announcement was Google Gears. The ability to use Google spreadsheet, Google documents, Gmail and Google Reader while not connected to the internet. Google’s office suite can now be used in lieu of Microsoft’s Office suite. Google has stepped out onto the desktop software arena, no question.

Members of the Hispavista innovation team were present, with their boss Jon Elosegui, to hear the latest update on Google’s APIs for the various mashup projects in incubation. User Generated content is increasingly geo-tagged and Google maps renders such tagging best at present. With Google Developer day ongoing in 10 cities, we were not alone.

[Ian Forrester provides a good interview of Chris Dibona over…

Panda Software Company Sold Cheap

panda antivirus

Panda software, one of top antivirus software companies in the world, has been purchased by a Venture Capital Syndicate. Panda software founders have sold 75% of the company at a reported €133m valuation. Oddly, Panda has not issued an official press release. The valuation is a sales multiple of less than times one last reported revenues. An inexplicably low sale price for a world player in the antivirus market.


Local hero, Mikel Urizarbarrena, has always been a reference to EUCAP partners in northern Spain. Mr. Urizarbarrena has created a world leading software security company, while retaining 100% of founder equity. A staggering entrepreneurial feat.

As recently as 2005, Panda was ranked number four in market share, as shown in the table below.

Worldwide 2005 Total Antivirus Software Revenue for All Software Segment Types
(Millions of Dollars)

Company 2005 2005 Market Share (%) 2004 2004 Market Share (%) 2004-2005 Growth (%)
Symantec 2,150.4 53.6 1,915.3 54.2 12.3
McAfee 753.9 18.8 666.5 18.9 13.1
Trend Micro 555.7 13.8 509.3 14.4 9.1
Panda Software 128.6 3.2 103.9 2.9 23.8
CA 86.5 2.2 75.3 2.1 14.9
Other Vendors 340.2 8.5 263.0 7.5 29.4
Total 4,015.4 100.0 3,533.2 100.0 13.6

Source: Gartner Dataquest (June 2006)

Currently, Symantec has a market cap of €12b, and McAfee €4b. F-Secure, a recent European entrant to the top 5 antivirus products, has a €380m market cap on the Helsinki stock exchange.

On these 2005 sales multiples, Panda should have been valued in the €700m range.

The speculation is that recent Panda revenues have come under pressure from smaller entrants like Sophos, F-Secure and Bitdefender (SOFTWIN), in the race for new hardware platforms like mobile, and the lucrative corporate market.

As the market consolidates further, it is clear capital is the key to funding the marketing and sales drive required to maintain market share. One can speculate that Panda was under-capitalized during 2006, as the founders were reluctant to accept new shareholders.

Hopefully, the supposed €100m injected in the company will provide the impetus to consolidate its market share, and see Mr Urizarbarrena through to a successful public offering at a billion € valuation.

[Via Investindustrial y Gala Capital compran Panda Software –]

A press release has been issued

Hispavista launches free video service for the spanish market

spanish free - video gratis

Hispavista, portfolio company, launches new free video service for the spanish market. Fully web2.0 compliant, the team led by Jon Elosegui, has put together tag clouds, RSS feeds and social voting and filtering functions.

Three days after launch, two email marketing campaigns later, we have over one thousand video clips uploaded. There is nothing quite like having a database of several million opt-in users for launching a viral marketing campaign. Needless to say the User Generated Content editing team, which currently covers our free web page service, have had their hands full with pornographic video clips. The new lesson is User Generated Censorship. The team has implemented a “one complaint, you are out policy”. This morning after reviewing click-stream and user generated voting and complaints, the team has deemed social censorship reliable. Nice result.

The team has been pulling all-nighters for the past week, and the coffee machine has also borne the brunt of the effort. My personal favorite (in spanish)

[Disclosure: Jon Elosegui is my brother, and we are invested in Hispavista.]

Lycos Acquires German Online Shopping Technology

Lycos Europe, european online portal has acquired Mentasys, shopping software provider, for €30m and an additional performance related €14m. Mentasys software connects sales networks with intelligent product advisors. The software facilitates the sales process. Mentasys’ 60 staff doubles Lycos’ shopping technology development team. According to Antoine Boulin, MD of Pangora HQ in France.

Pangora and Mentasys competencies are very complementary. Pangora brings its expertise in front-end technologies, sales and international distribution. With this new partnership, Mentasys brings know-how in back-end technology, product data and reviews…
[Free translation]

Lycos, european online portal, is investing in its white brand shopping portal Pangora. Christoph Mohn, CEO de Lycos Europe declares

We are convinced that more and more purchasing will be done online. European online shopping sector has double digit growth every year. Lycos Europe has a strong position in the sector and is constantly improving its performace thanks notably by its Mentasys acquisition. It’s strong expertise, specially in B to B, and its white brand shopping solutions will help us in more than our German market. We forecast these sales figures in other markets like UK, France and Italy.
[Free translation]

Pangora’s own brand shopping site is, which has a small market share in Germany; the site is yet to top 500,000 unique users a month. Lycos is pushing the eVita brand to France and UK. Though not part of the top 10 shopping sites in UK, Europe’s top market, the eVita is expected to contribute significantly to Lycos’ struggle for positive cash-flow.

[Via euro adhoc: The European Investor Relations Service]

Lifestyle Companies – The Scourge of VC Portfolios

In a moment of weakness marketing guru Seth Godin muses that “So, what’s wrong with small business?”. In VC culture, stable no growth companies – or lifestyle companies – are disaster investments little better than bankruptcies.
Barings Bank observed in a recent review of startup investments that 20% of companies developed into substantial profitable businesses, 20% failed and lost all equity, and 60% drifted sideways often regressing to life-style businesses for a small group of owner-managers.
The fact is that an investor, bank or VC fund, does not inject money into a business to improve the founders life-style and status. A VC fund usually has a 5 to 7 year window in which to realize the value of their investment. Investors want growth, preferably in multiples of 10. Life-style companies clutter up a portfolio, and require investors to negotiate a buy-out with managers. Not quite bankruptcy, but not much better.
However, ultra-growth comes at a price always. No pain, no gain. Or in financial notation, no volatility – no return. Startup owners have to suffer through extreme risk and volatility in order to accomplish growth. Life is easier and safer for the small business owner, happy with his place in the status quo.
But is safe not risky ? With increasingly dynamic markets, globalization, a stable life-style company can have some nasty surprises as competitors, with greater economies of scale, descend on its little niche. Everybody has to acquire an appetite for change, either gradual or in big lumps. Small companies are not what they used to be.