Legendary investor Sir John Templeton passed away in 2008, at the age of 95. An investment of $10,000 in his Templeton Growth Fund in 1954 would have grown to approximately $2m by the time he sold the company in 1992, but how did he achieve that success?
Templeton was born in 1912 in the small town of Winchester, Tennessee. His flair for business was evident at an early age: While still in school, he noticed that there was nowhere in the area to buy fireworks, so he traveled to the city and bought a consignment of fire crackers and Roman candles which he sold in the school playground “at a considerable mark up“.
He went on to Yale, from which he graduated in 1934, then moved to Balliol College, Oxford, as a Rhodes Scholar, graduating with an master’s degree in law.
His career on Wall Street started in 1937. As war was breaking out in Europe in 1939, he borrowed $10,000 from his boss and invested $100 in every share priced at a dollar or less, 104 shares in total. Four years later he had quadrupled his money.
In 1954 he established the Templeton Growth Fund, which he managed directly until 1987, eventually selling the company to Franklin Group for $440m in 1992.
His buying at the outbreak of World War II is typical of his contrarian strategy, capitalising on the fears of he market. “It is impossible to produce superior performance unless you do something different from the majority.“
This requires strength of character and independence of thought. “It takes patience, discipline and courage to follow the contrarian route to investment success. To buy when others are despondently selling, to sell when others are avidly buying.“
This can appear to some extent like trying to time the market, but Templeton believed that at any point in time you can usually find some company or sector or country that is unfairly shunned by investors, provided you look widely enough. “The best time to invest is when you have money. This is because history suggests it is not timing which matters, but time.“
And looking widely is a hallmark of his style. He was a pioneer of emerging markets, recognising in the early 1960s that Japan was grossly underestimated and undervalued. His interest in emerging markets was not because faraway hills appear greener, but because “it makes sense that you will find better investment opportunities when you search everywhere in the world instead of just at home“. For that reason, his scope was always global.
Templeton was always known as a fundamental investor, paying attention to the intrinsic value and characteristics of his investments, rather than to technical analysis of charts. His indiscriminate investment in all sub-dollar stocks in 1939 seems to contradict this theory, but it should be remembered that this was very early in his career. One of his maxims of investing is to continue learning, while another is to keep an open mind and be flexible in your approach, so it would be odd if his style did not evolve.
Ethics were also important to Templeton, and he believed that unethical businesses, while they may succeed in the short term, would ultimately fail.
Philanthropy and beliefs
That ethical position was driven by his deep Presbyterian faith, and throughout his life he devoted considerable effort and resources into bridging the gap between spirituality, in all its forms, and science. His Templeton Foundation carries on this work, awarding prizes and grants of $70m annually to support research on the ‘Big Questions’.
In keeping with these beliefs, his lifestyle was relatively modest and he always flew economy class.
Templeton based himself in Nassau in the Bahamas for much of his life, and became a British citizen. In 1987 he was created a Knight Bachelor by the Queen, in recognition of his philanthropy and his endowment to the University of Oxford.
But many investors will remember him in the words of Money magazine – “the greatest stock picker of the century“.
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