| Fund or
affiliation
Methodology
- Flexibly adapting
his investment style (which has elements of both
growth and value) to fit different times,
countries, and investment climates.
Research Techniques
Employed
- The best bargains
will be in stocks that are completely neglected,
that other investors are not even studying.
- His selections range
over many markets: at home with Japanese, Canada,
and American; and knows Switzerland, Germany,
Holland, Belgium, Australia and South Africa.
- Conditions an
investor should avoid: inflation and socialism
[or government regulations].
- Banks are natural
candidate for regulations; Newspapers are
regulation resistant, freedom of speech!
- Supermarkets are
good inflation hedges.
- The population of
Lyford Cay is made up of successful
industrialists from many parts of the world. It
became Templeton’s network of sources. He is
also founder of Young President’s
Organization.
- He studies the
portfolio’s of his peers, he tracks about
20. He cosiders Harry G.A. Seggerman of Fidelity
Pacific Fund to be skillful in foreign companies.
- Early in his career
he visited hundreds of companies, his standard
questions are:
- Do you have a long
range plan?
- What will be your
average annual growth rate?
- Why should the
future be different from the past? What are your
problems?
- Who are your ablest
competitor? Why?
- If you couldn’t
own stock in your company, which of your
competitors would you want to invest in... and
why?
- Makes extensive use
of The Value Line Investment Survey for figures,
and Wall Street Transcript as an aid. He makes
wide use of brokers, but only to establish facts,
not recommendations.
Trading/ Valuation
Techniques Employed
- Transaction pattern:
insisted on buying only what was being thrown
away, and he held the stocks for an average of 4
years.
- He admits he makes
constant mistakes, but because he is heavily
diversified, the damage is limited.
- He buys into small
companies that his clients never even heard of,
and is prepared to buy almost all the stock
available.
- Once a stock moved
up and no longer a bargain, then if he finds a
much better buy, out goes the first one.
- Templeton’s
analytical approach to determine the intrinsic
value of companies, 6 factors:
- P/E ratio.
- Operating profit
margins.
- Liquidating value.
- Growth rate, in
particular the consistency of earnings growth.
- Flexibility.
- Don't trust rules
and formulas.
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Philosophy
and beliefs
- Everything has its
seasons, which does not last forever. The world
changes its spots, and the investor must change
his. After his interest in small "soecial
situations" and growth stocks, he favored
Japan (which reached a peak of 60% in 1970) and
other foreign countries, then later, big
multinationals like Ford and Royal Dutch.
- Search among many
markets for the companies selling for the
smallest fraction of their true worth.
- Flexible viewpoint
[open mindedness] is the professional
investor’s greatest need, and will be
increasingly in the future.
History and other
facts
- He won a Rhodes
scholarship to Oxford.
- We worked as a
trainee for Fenner & Beane, one of the
predecessors of Merrill Lynch.
- At 56 years of age,
he moved to Nassau, Bahamas, and built his house
on Lyford Cay Club grounds. Supposedly, he can
escape from news and opinion, and the surge and
ebb of the passions of the crowd.
- Due to the small
size of Templeton Growth Fund, he can be very
flexible, like moving 50% to cash, and does not
need to stick to familiar names.
- Templeton endowed a
prize for progress in religion.
Examples
- One day in 1939, he
bought every single stock on both major exchanges
which were selling for under $1.00, bankrupt or
not. He held for 4 years on average and got
$40,000- 4 times his cost.
- Buys Ito Yokado at
10 x P/E and 30% growth, rather than Safeway at 8
x P/E and 15% growth.
- He considers Real
Estate as a field of perennial interest in
inflationary era, and bought a package of
Canadian RE companies that no American investors
have heard of.
Performance Record
- 16% over 20 years:
"Over the 20 years ending 1978, a $1,000
investment in his fund became worth about
$20,000, if all distributions had been
reinvested...", J.Train, MM pp. 160
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