How to invest like ... Sir John Templeton

Investors are always being told to "buy low", he pointed out, but if you do this you are automatically going against the crowd – prices of shares, like anything else, are low when there is little demand for them from other buyers.

Throughout Templeton's long life as an investor – he started on Wall Street in 1937 and was still giving staff at his Anglo-American fund management business, Franklin Templeton, the benefit of his wisdom in the current century – he was constantly treading a lonely path, usually to the great benefit of investors in his funds.

Also in our "How to invest like" series:

• How to invest like ... John Maynard Keynes

• How to invest like ... a Victorian investment trust

He was the first Western investor to see the potential of Japan's post-war economic miracle. When he first invested there, in the Sixties, Japan was in effect an emerging market and the dynamism of its economy was not being reflected in the stock market.

Gradually the rest of the world woke up to what was happening in Japan and the stock market soared. But Templeton was once more ahead of the game. He had just 3pc of his money in Japan by the peak of its stock market bubble in 1989 because he had identified the US market as the next one due to recover.

This is exactly what happened during the Nineties but Sir John – he was knighted in 1987, having become a British citizen – still managed to outperform, achieving growth of 75pc against a market rise of 45pc.

During the technology bubble later the same decade Sir John once again went against the crowd, putting none of his investors' money in the "technology, media and telecoms" sector into which so many others were pouring their cash. He chose solid commodity stocks instead, and was again rewarded when Asia recovered.

But he wasn't just good at spotting the broad global trends in stock markets, he was a shrewd picker of individual shares.

"Ultimately, it is individual stocks that determine the market, not vice versa," he said. "All too many investors focus on the market trend or economic outlook. But individual stocks can rise in a bear market and fall in a bull market."

How did he choose which shares to buy? His mantra was: "When buying stocks, search for bargains among quality stocks."

In his "Sixteen Rules for Investment Success", published in 1993 but still full of advice relevant today, he said quality companies came in different forms but included those strongly entrenched as the sales leader in a growing market, technological leaders in a field that depends on technical innovation and those with strong management teams with a proven track record.

Alternatively, he said: "Quality is a well-capitalised company that is among the first into a new market. Quality is a well-known trusted brand for a high-profit-margin consumer product."

He said investors should "investigate before you invest – study companies to learn what makes them successful".

Sir John did not believe in the idea of "buy and forget" shares, saying "the pace of change is too great". Instead, investors should "expect and react to change" and monitor investments "aggressively".

His principles are used "on a day-to-day basis" in the running of Franklin Templeton's Templeton Growth fund, according to its lead manager, Dylan Ball.

"His presence still looms large – we are the team that he set up and continued to manage into this century," Mr Ball said. "His influence on us is all-encompassing.

"After I joined the company in 2007, he would still come in and talk to us. His mind was razor sharp to the end." Sir John died in 2008.

Mr Ball added: "We use his investment philosophy as we know it works and makes money for our clients. The way we search for undervalued stocks hasn't changed in 50 years – it consistently produces outperformance."

Sir John was not just a successful investor, he was also a committed Christian and a generous philanthropist.

In 1972 he established the Templeton Prize, which, according to the charitable foundation that he started, is the world's largest annual award given to an individual. The prize, which rewards "spiritual" achievements, is currently £1m and always exceeds the value of the Nobel Prizes. Winners have included Desmond Tutu and the Dalai Lama.

Part of Sir John's optimistic attitude was a belief that successful businesses benefited humanity. "Competitive business enriches the poor more than any other system humanity ever has had," he said. "If a business is not ethical, it will fail, perhaps not right away, but eventually."

In his obituary, the Wall Street Journal said: "As an investor, he always had confidence his picks would improve over the long term. Appropriately, the same 'enthusiasm for progress', as he put it, also made him one of the world's great philanthropists."

 

Calvin comments:

Legendary Sir John Templeton is the Lone Ranger of Value who dared to Buy Shares at the Outbreak of the 2nd World War (This is not Trade War. But Real War where Millions of people get killed & Businesses come to a complete collapse!)

Yet he dared to buy

See