Judas Goat

In one of the most bizarre spectacles in agriculture history, nicotine-addicted Judas goats once led sheep to slaughter down livestock’s version of the green mile. The aptly named Judas goats, rewarded with a single cigarette for every herd of sheep deceitfully escorted to the killing floor, were once key players in meatpacking plants. 

The slaughterhouses of yesteryear were multi-level structures, sometimes five or six stories in height, with each floor housing a specific function related to animal processing. The killing floor occupied the top level and served as a conduit to further processing on the floors below.

Getting large quantities of livestock to the top floor, a space bathed in the smell of death, required systematic efficiency. Cows could be cajoled; pigs could be coaxed; but sheep were a breed apart—an entirely different proposition.

Enter the Judas goat. 

It strains credulity to envision the surreal parade of a lone goat leading sheep across a meatpacking facility, coaxing the flock up concrete ramps, delivering the herd beyond the point of no return, and then seeing the goat hustling toward a nicotine fix and a repeat performance. However, Judas goats were part-and-parcel of livestock slaughter, and their history sheds a fascinating light on a bygone era. Betrayal by bleat [the yell of a goat] and tobacco. 

“The only way to calmly get them [sheep] on the killing floor was a goat. We’d take the goat and put him in front of the sheep. Up the ramp they’d go, following Judas. If the sheep hesitated, Billy would bleat to keep them moving. If they didn’t come, he’d stop, turn around, bleat more, and wait for them to catch up.” 

At the pinnacle, on the sixth floor, a single doorway led to the final point of debarkation. After the last sheep went by, the goat came back down the ramp to get his reward.

The goat was trained on unfiltered cigarettes, particularly one Camel or Lucky Strike per trip, specifies Dunn. “He ate it whole. He loved it because he was addicted to nicotine.”

The story above is an excerpt from an article by Chris Bennett called, Judas Goats: Agriculture’s Bizarre, Drug-Addicted Masters of Deceit Once Ruled the Killing Floor. 

In every industry there are people that knowingly and unknowingly lead sheep to slaughter. The financial industry is filled with them. Judas goats seem to multiply during bull markets. The worst part of bull markets is the rise of inexperienced people educating other inexperienced people. The thing that exacerbates the problem is the human desire for stock recommendations and to buy into them blindly. Most people are wired to be sheep. 

Don’t be a sheep. 

One of the most painful lessons is following people, even high-profile investors, into stocks you don't understand and losing money. Don’t worry, everyone has done this at least once. If you don’t do your own work, you will get slaughtered, especially in microcap.

!WARNING! – controversial statement coming that is 100% true. 

Most microcaps you buy must be sold within 36 months. Even the winners. Only a small fraction of the winners will have management teams and businesses that can evolve and grow into something truly sustaining. This is a bitter pill for the buy and hold forever crowd to swallow, but it is microcap reality. 

When the crowd buys into an illiquid situation it is fun watching it go up. When the crowd decides to sell an illiquid situation, sheep get slaughtered. If you don’t do your own work, you don’t know when to sell. If you are waiting for someone else to tell you when to sell, it is already too late.  

In the rare occasion a sheep buys a monster stock they will never reap the full reward. Every monster stock that ascends 1000%+ over a 3-5-10 year timeframe goes through seasons where the stock is loved, hated, cheap, and expensive. 

If you can’t form your own conviction, you will get run over by your emotions. You have to put in the work/earn the right to 10-100x stocks.

Sheep (followers) get slaughtered either way. Don’t be a sheep. 

Don’t be a Judas Goat. 

If you're a young stock picker and looking to build a reputation - find a great company early, before institutions. Do the work. Be public about it. Be the axe in the name. Be right. People, employers, investors will find you. Then do it again and again. It's the only resume that matters. This is how I built my early reputation on public stock message boards. 

But it’s easy to take things too far. I know I did. When I was young and naïve I would pound on a specific company, and post on the message boards with the consistent drum beat of bullishness. Oftentimes as the stock would rise, my ego would swell, and I would pound that drum even harder. 

My early mentor once told me, “Ian, you can get them up [the stock price], but the business needs to keep them up.”

Building your reputation in illiquid stocks with short shelf lives can be problematic as your reputation grows on social media, Substack, or paid recommendation service. When “the crowd” piles into an illiquid thing, not everyone will be able to get out. Some portion of your followers will be left “holding the bag” and feeling used. Especially if they saw you bleating and luring the sheep higher into the slaughterhouse as the stock rose.  

The hardest part of influence is knowing when to stop. 

If you are building your reputation publicly - be thoughtful and disciplined with how you communicate to your audience. 

• Give your audience unique situations with supporting evidence. Give them the facts, then let them decide. Educate people so they can make decisions themselves, so when the next material event happens, they can think for themselves. Communicate to them that they own their buy and sell decisions. 
• Don’t talk in absolutes like “X stock is going to Y price”. You can’t predict the future with certainty. Talk in if/then statements. “If the business does X, I think the stock can do Y.” Tie the stock price to the business performance, so you never look dumb.
• As stocks rise, expectations rise but keep yours grounded. A good rule of thumb is to be quieter than you want to be when you are right. Stop reaching for reasons the stock can go even higher. Don’t pound the drum at the top. Your audience already knows you found it early. Control your ego. 
• Don’t talk bullishly about a stock unless you own it and would buy it at the current price.
• Don’t ever talk bullishly about a stock you are selling. 

If you want to gain followers, talk about your winners. If you want to gain the respect of your peers and keep your followers, talk about your losers. Postmortems are where the real learning happens. 

Talking about your losers in a once per year, longer form post, shows your audience what you and they can learn from the losers. It also reinforces the right lesson – you aren’t going to be right all the time. Microcap success is batting average + slugging percentage. You can make a lot of money being right half the time. 

When you are building your reputation, the way you communicate matters. Be thoughtful. Don’t be an amateur. Future investors, employers, business partners are watching you. 

The world doesn’t need more sheep. The world doesn’t need another Judas goat.

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