Wednesday, July 09, 2008

John Templeton 1912 - 2008

When Templeton started his career, Americans hated Wall Street. After the 1929 crash and the Great Depression, the stock market’s recent performance justified many of these suspicions. The market seemed to operate for the benefit of insiders and the very wealthy. Templeton didn’t invent the mutual fund, but he made it popular and reputable.

Mutual funds now feel like an obvious and indispensable part of the investing landscape. But before the 1950s, the vast majority of stocks were held directly by individuals, most quite wealthy. Templeton helped popularize mutual funds and put stocks in the hands of the individual investors.
An often quoted fact was that a US$10,000 investment in Templeton Growth Fund in 1954 would have brought US$2 million by 1992 or an annualized return of 14.5%. John sold his company to Franklin Resources for US$913m in 1992.

Templeton was a value investor, meaning he was great at picking unfavored stocks and holding onto them long term for great returns. Like another investor in the next generation, Warren Buffett, Templeton was great at ignoring the conventional wisdom. In many ways he was known and deserved the title as emerging markets king, for his gutsy investing style when it was not popular at all. He was investing in Japan in the 60s and followed that in the 70s to invest in Russia, China and other Asian markets. Oh yes, he sold large chunks of his holdings in 2000 before the internet bubble imploded.

Templeton was a lot like Buffett in that both believed you need to distance yourselves from Wall Street to have better performance. There is just too much noise from the talking heads - everybody wants to tell you the next big story or lie. John gave up his American citizenship and lived in Bahamas.

His worldly views, more important when it was not popular then as it is now, makes him a standout. His daring investing ways before it was popular to even consider emerging markets, sets him apart. The fact that he also had a highly successful track record was secondary in my view. He should be regarded as a pioneer and 'explorer of markets'.

A more interesting fact is that while he was a Presbyterian church elder, he was very involved in the concept of spiritual truth and faith. He has set up the Templeton Foundation to fund research into spiritual matters. Templeton remained open to the benefits and values of other faiths. Commenting on his commitment to what he called spiritual progress, “But why shouldn't I try to learn more? Why shouldn't I go to Hindu services? Why shouldn't I go to Muslim services? If you are not egotistical, you will welcome the opportunity to learn more.

Similarly, one of the major goals of the Templeton Foundation is to proliferate the monetary support of spiritual discoveries. The Templeton Foundation encourages research into "big questions" by awarding philanthropic aide to institutions and people who pursue the answers to such questions through "explorations into the laws of nature and the universe to questions on the nature of love, gratitude, forgiveness, and creativity."

Templeton asserts that the purpose of the Templeton Foundation is as follows: We are trying to persuade people that no human has yet grasped 1% of what can be known about spiritual realities. So we are encouraging people to start using the same methods of science that have been so productive in other areas, in order to discover spiritual realities.

Templeton contributed a sizable amount of his fortune to the John Templeton Foundation, established in 1987 and based in West Conshohocken, Pennsylvania. The Foundation currently has an endowment of approximately US$1.5 billion and gives out some US$70 million in annual grants. The Foundation's mission is to serve as a philanthropic catalyst for research on what scientists and philosophers call the "Big Questions." This vision is derived from Templeton's belief that rigorous research and cutting-edge science are at the heart of human progress.

Most of the Foundation's grant-making supports scientific research at top universities, in such fields as theoretical physics, cosmology, evolutionary biology, cognitive science, and social science relating to love, forgiveness, creativity, purpose, and the nature and origin of religious belief. The Foundation also encourages and supports informed, open-minded dialogue between scientists and theologians as they work on the "Big Questions" in their distinctive fields of inquiry.

Back To Investing Issues

In 1939, with Hitler's Germany ravaging Europe, John Templeton bought US$100 of every stock trading below $1 on the New York and American stock exchanges. Templeton's trade got him a junk pile of some 104 companies, 34 of which were bankrupt, for a total investment of roughly US$10,400. Four years later he sold these stocks for more than US$40,000!

His investing style can be summed up as looking for value investments, what he called "bargain hunting,"by searching out such targets in many countries instead of just one. Templeton's investing mantra was "search for companies around the world that offered low prices and an excellent long-term outlook."

As a value-contrarian investor, Templeton believed that the best bargains were in stocks that were completely neglected - those that other investors were not even studying. In this regard, he had an advantage not readily available to the average individual investor – his residence in Lyford Cay in the Bahamas. The Lyford Key Club was populated with successful businessmen from all parts of the world.

Important Quotations By John Templeton:

Rejecting technical analysis as a method for investing, Templeton says, "You must be a fundamentalist to be really successful in the market."

"Invest at the point of maximum pessimism."

"If you want to have a better performance than the crowd, you must do things differently from the crowd."

"When asked about living and working in the Bahamas during his management of the Templeton Group, Templeton replied, "I've found my results for investment clients were far better here than when I had my office in 30 Rockefeller Plaza. When you're in Manhattan, it's much more difficult to go opposite the crowd."


David said...

Any good books on him that reveals his secret or investing methodology?

Victor AY said...

Today we see the demise of another great investor and philanthropist in this great era of stock market investing joining people like Benjamin Graham and Philip Fisher to the other realm.

Let's hope more new great teacher/investor coming up to replace them and make the stock market world more interesting

Salvatore_Dali said...

Golden Nuggets from Sir John Templeton (Hardcover)
by John Templeton (Author)

Sir John Templeton (English)
From Wall Street to Humility

Investing the Templeton Way
The Market-Beating Strategies of Value Investing's Legendary Bargain Hunter
Lauren C. Templeton, Scott Phillips

clk said...

Today we live in a "short term" world where with computers we assume that results can obtain "quicker results" given the high utilisation of IT.

Patience, long term views and going against the crowd still counts for a lot as compared to the noise coming to us via the media.

Why do we have to track stocks by the minute just because we can get real time prices? Its just like being on a roulette table!


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