Westergaard's "Wind Behind" Theory
From wbn.com
November 12, 1997
We Define the "Wind Behind" Investment Theory By Which Westergaard Broadcasting Network Picks Companies For Research Coverage
My experience over 40 years of pursuing investment research and investment management of micromidcap companies is that they are rarely successful in the long run unless (1) they have a thematic "wind behind" which is to say a macroeconomic force into which the business is playing, or (2) they have a compelling proprietary aspect to their business which leads to ascendancy within an industry.
In the "wind behind" category I would present as an example Identix, Inc. (IDX 10 AMEX), the leader in biometric finger imaging technology. There is a wind behind this company -- indeed a gale force. It is the ubiquitous global need for security in virtually every aspect of business and commerce.
Finger imaging has been the universally accepted medium of identification for over a century. IDX's business supplying this market with digital technology is growing dramatically on top of which there is a "holy grail" overlaying everything. It is the possibility that the Company's biometric technology will become embedded in compter keyboards. One is then then looking at another Microsoft where its technology would become as fundamental to communications as Microsoft's operating systems are to computers.
Or take a little company such as ADDvantage Media Group (ADDM 3 Nsdq) which puts calculators on shopping carts in Wal-Mart super stores. Shoppers like the product, use it, and respond to the advertising that resides on the calculators. It is a simple idea with a wind behind it which is a large scale movement of advertising dollars in search of in-store media by which to present consumer products. That's a very big wind blowing on a very small company.
Or take Vishay Intertechnology (VSH 21 NYSE) which I first spotted in the early 1970s and began actively following in 1976. Its business has grown from $30 million in revenues when it began attending Westergaard Waldorf Conferences in 1979 to now well over $1 billion.
In the case of Vishay the "wind behind" the growth in demand for its main product line, resistors, was of a secondary nature. It blew primarily on the Company's customers. What drove its success was a world class scientific base which permitted high gross margins leading to large cash flow leading in turn to a dominant high end market share which was translatable downmarket through acquisitions.
In due course this lead to an industry consolidation encompassing first North America, then Europe, and more recently Asia. In short, the force behind Vishay's phenomenal growth was internally derived from a scientific base supported by strong manufacturing, marketing and financial management.
John Westergaard |
