John Templeton On His Investing Strategy | 1985

Transcript

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Summary

This video features an interview with three highly successful investors who have defied the notion that no one can consistently beat the stock market. John Templeton, the most senior and experienced among them, shares insights into his investment philosophy and strategies. He emphasizes the importance of going against the herd mentality, finding bargains in unpopular stocks, and making long-term investment decisions. Templeton also discusses the temporary nature of investment trends and shares his perspective on global investment opportunities. Notably, he attributes his success not only to his wide-ranging research and estimates but also to his reliance on prayer in decision-making.

Questions & Answers

Q: What qualities enable a person to achieve significant success as an investor?

Achieving great success as an investor requires certain qualities, including the ability to go against the popular opinion and seek out undervalued stocks. It also involves having a long-term investment perspective and the fortitude to hold onto investments during times of pessimism. Additionally, successful investors often have a global mindset and conduct extensive research to identify potential bargains.

Q: How does John Templeton's investment style differ from that of Philip Fisher and Warren Buffett?

John Templeton distinguishes himself from Philip Fisher and Warren Buffett in a few ways. Firstly, he pursues a more global approach to investing, searching for opportunities beyond specific industries or nations. Templeton also tends to make estimates about a company's earning power further into the future than others might. However, the most significant difference lies in Templeton's reliance on prayer in decision-making and the incorporation of spiritual aspects into his investment philosophy.

Q: How does Templeton determine the opportune moment to buy or sell stocks?

Templeton follows the motto of buying when others are despondently selling and selling when others are avidly buying. He acknowledges that this approach requires considerable fortitude but claims that it ultimately leads to the greatest rewards. He applies this principle not only to stock market cycles but also to specific industries and types of stocks. Templeton looks for stocks selling at depressed prices, often unpopular with other investors, as this usually presents a buying opportunity.

Q: Why does Templeton prefer to operate his mutual funds from the Bahamas rather than Wall Street?

Templeton initially moved to the Bahamas because of its pleasant environment. However, he discovered that his mutual funds performed better during the 22 years they have been managed from the Bahamas than when they were managed from New York City's Radio City. Templeton suggests that being physically distant from Wall Street allows him to be more contrarian and independent in his investment decisions.

Q: How does Templeton navigate the fluctuations and trends in the stock market?

Templeton believes in the long-term approach and asserts that short-term fluctuations and trends do not sway his investment decisions. His average holding period for investments is six years, indicating a focus on long-term growth and value. He also stresses that his estimates and research help identify bargains, irrespective of the short-term market movements.

Q: What has been Templeton's experience with investing in energy companies like Royal Dutch Petroleum?

Despite widespread expectations of a decrease in oil prices, Templeton's largest holding is in Royal Dutch Petroleum. He explains that the stock is selling at a low multiple of its estimated earnings and is undervalued based on its potential liquidation value and current cash flow. Templeton believes that when investors are expecting bad news, it is often the low point for share prices, and bargains can be found. He admits that prices may temporarily drop further, but he remains confident in the long-term value of the investment.

Q: How does Templeton approach investing in different countries?

Templeton does not prioritize specific countries or industries when making investment selections. Instead, he looks for the best bargains worldwide, irrespective of the nation. He believes that the most successful results come from areas where other security analysts are not heavily focused. Recently, Templeton has found more opportunities in the United States, Canada, Australia, and the Netherlands.

Q: Does Templeton continue to hold his prediction that the Dow Jones could reach 3,000 within five years?

Templeton concedes that he does not usually make predictions, but a few years ago, he shared his view that the Dow Jones could potentially reach 3,000 within five years. Although he acknowledges the fluid nature of such predictions, Templeton still believes that the chances of it happening are as good as even. He bases this on various factors, including value and the availability of cash.

Q: What does Templeton think about the current takeover mania in the market?

Templeton sees the current takeover frenzy as proof that share prices are undervalued. He suggests that corporations on the stock exchange are selling for much less than their actual worth, as demonstrated by the increased number of companies buying back their own shares. This trend reinforces his belief that values in the market are unusually low.

Q: How has Templeton's reliance on prayer influenced his investment outcomes?

Templeton incorporates prayer into every aspect of his investment process, including starting directors' meetings with prayer and praying about every decision made. While this spiritual approach does not guarantee that stocks will go up, it helps Templeton seek wisdom and make more informed investment choices. Ultimately, the reliance on prayer is another factor that contributes to his track record of success.

Takeaways

This interview with John Templeton highlights several key insights for successful investing. Templeton emphasizes the importance of going against the herd mentality and seeking out undervalued stocks. He recommends buying when others are selling in a despondent market and selling when others are avidly buying. Templeton's global approach to investing and wide-ranging research contribute to his ability to identify bargains worldwide. He also emphasizes the significance of maintaining a long-term perspective and not being swayed by short-term market fluctuations. Finally, Templeton's unique incorporation of prayer and spirituality into his investment philosophy sets him apart from other successful investors.