The Templeton Touch
Templeton's method: buying at the point of maximum pessimism worldwide
Summary
Proctor wrote this authorised account of John Templeton's investment approach in 1983, drawing on interviews with Templeton and with people who worked with him, and it covers his career from the 1930s through the Templeton Growth Fund's long record.
Templeton's approach was global value investing before either term was common. He bought securities in markets other investors were not examining, on the reasoning that if you search where nobody else is searching you will find better prices, and he was among the first American managers to buy Japanese equities in the 1950s and 1960s when they traded at very low multiples. His stated method was to buy at what he called the point of maximum pessimism, to hold for an average of four or five years, and to sell when he found something better rather than when a target was reached. He worked from a bargain list maintained continuously, so that when prices fell he had already decided what to buy.
The book also covers Templeton's religious convictions, which he treated as connected to his investing through an insistence on humility about one's own judgement, and his later philanthropy.
The reference has not verified all of the specific performance figures and anecdotes, which come from an authorised account written while Templeton was actively managing money. The book is admiring and does not examine the periods when the approach underperformed. Its value is the statement of the search-where-others-do-not principle and the maximum pessimism discipline, both of which Templeton practised consistently over a very long record.
Key takeaways 7
- Search for securities in markets and countries that other investors are not examining, because the absence of competing analysis is what produces mispricing.
- The point of maximum pessimism is the point of maximum opportunity, and acting then requires having decided in advance what to buy.
- Maintaining a continuously updated list of what you would buy at what price is the mechanism that makes buying during a panic possible.
- An investor should sell a holding only when a materially better opportunity is available, rather than at a predetermined price target.
- Applying value criteria globally rather than within one country widens the opportunity set enough to change the results materially.
- Buying Japanese equities in the 1950s and 1960s at very low multiples worked because no American investor was looking, not because of any insight into Japan.
- Humility about the reliability of one's own judgement is a practical investment discipline rather than a moral posture, because it enforces diversification and position sizing.
Who should read it
Investors interested in global value investing and in the practical discipline of preparing to buy during panics, read as an authorised account.
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