Investing the Templeton Way

Lauren Templeton, a fund manager and John Templeton's great-niece, wrote with Scott Phillips about Templeton's investment approach, drawing on family access and on the record of his funds.

The method is bargain hunting applied globally and contrarian by design. Templeton's stated rule was to buy at the point of maximum pessimism, which he defined operationally rather than emotionally: the price must be low relative to the company's own long-run normalised earnings, and the pessimism must be about circumstances rather than about the business's permanent prospects. He searched globally from the 1950s onward, when almost no American investor looked outside the United States, and he treated country markets as a source of opportunity because whole markets could become cheap for reasons unrelated to individual companies.

The book documents the specific episodes. His 1939 purchase of a hundred dollars each of every listed stock trading below one dollar on the New York and American exchanges, financed with borrowed money, at the outbreak of war. His entry into Japan in the 1960s when Japanese stocks traded at a fraction of American multiples and capital controls made it difficult. His purchase of Korean equities after the 1997 crisis. His short position in technology stocks in 2000, taken by shorting companies at the expiry of insider lock-up periods.

The practical content includes his use of a wish list of companies with limit orders set at prices that would only be reached in a panic, which removes the decision from the moment of stress.

The book is written by a family member and is admiring. It also stops in 2008 and the treatment of Templeton's later years is brief. The approach depends on a willingness to buy when the news is worst, which the book describes but cannot teach.