Invest Like Sir John Templeton
Value investing. If you’ve been managing your own money for more than a day you’ve probably heard this term. Value Investing is widely considered one of the most successful investment strategies in the market. Want proof? Warren Buffet is a famous value investor.
He became a billionaire using the strategy.
So did Sir John Templeton. You’ve probably heard of the Templeton Funds which he founded back in 1954. You might even own some of these funds in your portfolio.
Templeton passed away earlier this month at the age of 95. It’s an unfortunate loss for everyone around the world. Not only was he a great investor he was a great philanthropist as well.
In 2007 Time magazine named him one of the 100 most influential people in the world.
But it wasn’t for his investing prowess. They highlighted his work at the Templeton Foundation. He supported work at top universities in fields like theoretical physics, cosmology, evolutionary biology, cognitive science, and social science relating to love, forgiveness, creativity, purpose, and the nature and origin of religious belief.
Fascinating work . . . with huge implications.
But I know what you’re thinking.
How did he become a billionaire?
Templeton knew a secret. He followed value investing as a strategy, and he was willing to hold on for long periods of time. He looked to invest in companies that traded at deep discounts to their intrinsic value. He looked for companies that everyone was ignoring, and he was willing to buy when everyone else was selling.
A perfect example of value investing.
This story is highlighted in his own biography. It speaks to his investing prowess, focus on deep value, and iron stomach. In 1939 war began in Europe. Templeton borrowed money to buy 100 shares each in 104 companies. They were all selling at a dollar or less per share. So confident was he that he even bought stock in 34 companies in bankruptcy. When all was said and done, only four of those investments turned out to be worthless. Holding an average of 4 years, he made exceptional profits on all the others.
He’s also famous for investing in Japan during the 1960’s . . . at a time when the entire country was being shunned.
The idea of value investing originated at Columbia University with Graham and Dodd. They were the first to focus on fundamental analysis and valuation. They published probably the greatest investment book of all time, Security Analysis. The tome is packed with valuable information about analyzing securities and looking at their valuations.
It’s an interesting read that I highly recommend.
Templeton took that knowledge a step further. He scoured the globe. He analyzed markets all over the world. He examined the leading companies in those markets. He looked at falling markets as “sales” where he could scoop up great companies at cheap prices.
He made investments that made his mutual funds millions of dollars. He was so successful that in 1999 Money Magazine called him “arguably the greatest global stock [investor] of the century”.
According to The Templeton Foundation,
“Each $10,000 invested in the Templeton Growth Fund Class A in 1954, with dividends reinvested, would have grown to $2 million by 1992 when Sir John sold the Templeton Growth Fund. This translates into an annualized return of 14.5% since inception.”
Templeton was clearly a phenomenal success. How can we invest like him?
What is a Templeton worthy investment? What would Templeton invest in today? We can only make an educated guess, but I have a few thoughts. We know he was focused on the emerging markets around the world. And we know he liked to invest when pessimism and fear was the greatest.
Right now as I look at the global landscape, two big countries keep cropping up. China and India. Take a close look at my two favorite ETFs iShares FTSE/Xinhua China 25 Index Fund (FXI), and the WisdomTree India Earnings Fund (EPI).
I know we’ve talked about these countries before, so I won’t rehash all the details. Let’s just say their future looks exceptionally bright. They have the potential for above average growth over the next ten years. Add to that the fact they both sell at large discounts from recent highs and you have a Templeton worthy investment.
Category: Foreign Markets
