John Templeton and Value Investing

John Templeton was a billionaire mutual fund pioneer that specialized in using a value investing strategy to buy stocks around the world.  By practicing a disciplined version of Benjamin Graham’s teaching on a global scale, Templeton amassed an astounding record that made shareholders of his fund wealthy and earned him hundreds of millions of dollars in well-deserved fees.

Toward the end of his life, John Templeton ran his international investments from his mansion on Lyford Clay in the Bahamas.  Just as he did in his educational background, graduating near the top of his class at Yale University and as a Rhodes Scholar to Oxford University, John Templeton distinguished himself in the world of value investing.  In 1999, he was named by Money magazine as possibly the greatest global stock picker in history.

John Templeton’s Value Investing Philosophy

Throughout the course of his career, Templeton was quoted as attributing his phenomenal success to the value investing strategy, as well as a few, key principles:

  • Avoid the herd.  Most people are driven by emotional considerations, not valuation.  By focusing on fundamentals, you can use this to your advantage.
  • Buy when there is “blood in the streets”.  The most money is made when you buy at the height of fear.
  • Take your profits when valuations are high.  Don’t be afraid, or feel like you made a mistake if you watch the shares of stock you sold go higher.
  • Pursue additional education.  Despite being one of the most famous practitioners of a value investing strategy, John Templeton still made a point to become a Chartered Financial Analyst.
  • Focus on income taxes.  You don’t have to go as far as Templeton did – as a result of his billions of dollars in wealth, he renounced his U.S. citizenship, thus avoiding income taxes.  He was a dual naturalized citizen of Britain and the Bahamas.
  • Keep your costs low.  Don’t fly first class.  Don’t spend a lot of money on a car.  The more money you have to put into your investments, the more money you will have to compound.  As time goes on, this can lead to millions upon millions of dollars in additional wealth for you, your family, and your favorite charitable organizations.
  • You don’t need to limit yourself to your surroundings.  Growing up in Tennessee, John Templeton told one interviewer that he never knew anyone who owned stocks.  If you limit yourself to the world in which you were born, you may never discover your true passions or the opportunities that lie beyond your horizon.
  • Inflation is a natural byproduct of democracy.  Politicians that are willing to spend more get reelected.  When the government doesn’t have the money, it has to print it.  Managing your portfolio for after-tax inflation is key.
  • Bargains are more and more scarce as information becomes available.  There were only a handful of security analysts in the world back at the dawn of value investing.  Today, there are tens, if not hundreds, of thousands throughout the world.  That means the job is going to be harder, but the rewards are still worth it.

The Most Important Lesson from John Templeton

Perhaps the most important lesson those who follow a value investing strategy can learn from John Templeton is to think globally.  There is no reason to restrict your investments to your home country.  If another nation has more attractive economics and offers higher returns on stocks and bonds, take advantage of it if you are able.  Over a lifetime, you just may build up wealth in countries around the globe, earning dividends and interest in everything from Canadian dollars to Japanese yen.

Recent Controversy Regarding Templeton Family Members Actively Campaigning Against Civil Rights in the United States

In the fight for marriage equality, the Templeton foundation, or rather, John Templeton’s son, has been recently identified as the media as one of the biggest opponents of granting civil rights to gay couples.  There has been considerable controversy around this in the press, notably large cash donations taken from the family fortune for the explicit purpose of prohibiting Californian citizens from enjoying the right to enter into civil marriages.

In time, demographic trends would suggest that this strong anti-gay activism could be viewed by subsequent generations the same way Henry Ford’s intense bigotry and anti-Semiticism toward Jews in now renounced.  I think it has become a rather unfortunate blemish on the Templeton name that will almost certainly be an embarrassment in history.  Considering the notable contributions John Templeton made to the field of investing, it is tragic that his son risks destroying his legacy and causing the name to be associated with such an immoral and evil cause.

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  • FratMan

    “I think it has become a rather unfortunate blemish on the Templeton name that will almost certainly be an embarrassment in history.”

    Does your admiration for someone ever diminish based on the actions of his husband/wife, children, others related to them?