Sir John Templeton died a few years ago, at the ripe old age of 95. He was the founder of Franklin Templeton Investments, which is one of the world's biggest players in the mutual funds industry.
Investing the Templeton Way was written by Sir John Templeton's nephew, and is partly a biography, and partly a guide on investing money. The book contains many interesting personal anecdotes about Sir John Templeton, starting with his childhood, to his impoverished teenage days during the Great Depression, and ultimately to his billionaire investment decisions in the late 1990s.
(I think Sir John Templeton then retired around that time, and spent the rest of his life focusing on philanthropic activities).
The book makes the recurring point that Sir John Templeton liked to buy shares at the "point of maximum pessimism". The best time to buy is when no one else wants to. The book contains many examples of Templeton made his millions (and ultimately, his billions) through this approach. Templeton was a bargain hunter, in an extreme sense of the word.
Conceptually, the strategy is easy to understand. In practice, many investors will not have the guts and the clarity of mind to consistently execute the strategy, even if they intellectually understand its merits.
Take a look at the Middle East now. Due to the recent turmoil in Egypt; the political unrest in Bahrain, Oman etc, and most of all, the ongoing civil war in Libya, stocks in the Middle East markets have dived sharply in the past month.
To most investors, this is bad news. To Franklin Templeton, this would have been a time to rub your hands in glee. Or at least to sit up, pay close attention and monitor, looking for the chance to dash in and buy good stocks at ridiculously cheap prices.
Because you really don't get wars every day! They are rare, excellent buying opportunities.
32 comments:
"Due to the recent turmoil in Egypt; the political unrest in Bahrain, Oman etc, and most of all, the ongoing civil war in Libya, stocks in the Middle East markets have dived sharply in the past month."
Mr Wang
But how come our stock market not dive sharply yet?
So not right time to buy, right?
I'm new to this whole investing thing but surely, there's something morally-deficient in the last sentence of your post, no?
Morally deficient?
Is there something morally upright about not buying shares when there are wars?
That's why he is able to talk about his way of investing. To those who lost their pants, what can they talk or teach others about investing.
In this world there must be lots of losers to give rise to one big winner.
If everyone wins, who loses?
if everyone buys into good companies, these companies generate more returns for their investors and everyone wins, no?
of course, very optimistic scenario ;)
"if everyone buys into good companies, these companies generate more returns for their investors and everyone wins, no?"
No, not at all. Your purchase of the company's listed shares does not do anything to directly help the company (unless it's an IPO - that is, the first time the company is listing its shares).
Otherwise, your money doesn't go to the company at all. It goes to the guy who sold you the shares.
I bought some old General Motors Stock when it was very "low" and very few people were buying at about US$2 per share (their highest record was nearly US$100). Today it is US$0.05! Should I buy some more - it meets Templeton's criteria, no?
:-(
Trust only Singapore blue chips, eg UOB, DBS, OCBC, SIA, Singtel and invest them the Templeton Way.
They won't end up like GM stock, for sure.
Unless of course, instead of PAP, the opposition wins 98% of the seats at elections.
Or there are mass protests like those in Tunisia, Egypt or civil war in Libya happening here.
Or the whole of Singapore hit by an earthquake like that in Christchurch.
Or the whole of Singapore hit by a Tsunami.
When that brotherhood guy dumped all his savings into swamp land when the price of palm oil was dead pan cheap. Everyone said he was a throwing pearls into a river. As the cost of draining the land and cultivating it was no cost effective. Today, oil palm prices have gone berserk and land has appreciated by three to four times. So I agree with Mr Templeton, buy when the market is dumping.
But I also believe another dimension that completes the formula of success is to be able to reinvent yourself. It is not easy for e.g to trade in your day job and just pick up a shovel and go into the jungle.
You missed the point. ALL of the below:
"... Unless of course, instead of PAP, the opposition wins 98% of the seats at elections.
Or there are mass protests like those in Tunisia, Egypt or civil war in Libya happening here.
Or the whole of Singapore hit by an earthquake like that in Christchurch.
Or the whole of Singapore hit by a Tsunami ..."
would potentially be excellent opportunities for buying more Singapore stocks.
Mr Wang. Employment fraud on the rise. Foreigners hiring their own, colonising the key technology sectors in Singapore. Getting top technology/banking jobs!
how!
http://moolahoooh.blogspot.com/2011/03/random-sampling-it-jobs-for-singapore.html
http://moolahoooh.blogspot.com/2011/03/fake-talents-in-singapore.html
"if everyone buys into good companies, these companies generate more returns for their investors and everyone wins, no?"
That reminds me of Egypt... specifically some 5000 year-old structures there...
Generating tourism revenues after all these years?
"Morally deficient?
Is there something morally upright about not buying shares when there are wars?"
There's a war. People's lives have been wrecked. We go yay! And buy loads of shares.
Heheh.
See, for every buyer who goes yay and buys lots of shares, there must be a seller who goes "Oh no!" and sells lots of shares.
I don't see either as any more or less morally deficient than the other. The guy who's selling his shares certainly isn't doing it to help the war victims.
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One could summarise Templeton's thinking like this -
Investors tend to overreact to extreme events. But extreme events eventually sort themselves out.
Wars;
bird flu;
terrorist attacks;
financial crises;
political assassinations;
Y2K bug;
AIDS;
pirates;
strikes;
riots;
nuclear disasters;
floods;
tsunamis;
political upheaval;
earthquakes;
Despite all of the above, the world goes on. A few companies die along the way, but most go on operating and making money.
(.... Because there are so many kinds of businesses in the world, it's inevitable that any kind of negative event will in fact benefit some kinds of businesses. Eg oil shocks benefit oil producers; bird flu benefits pharmaceutical companies; natural disasters benefit construction companies that do rebuilding work; wars benefit steel-making companies etc etc)
The best time to buy shares is when shares are cheap, relative to the companies' estimated future earnings.
And shares are cheap, when the majority of investors dump their shares in panic ....
"the companies' estimated future earnings."
Therein lies the difference between an investor and a speculator. :)
The trick, of course, is knowing the companies' estimated future earnings...
Never trust people who sell investment products touting high 'estimated future earnings' or 'high potential future earnings'.
They are just gimmicks to entice but always fall short on delivery.
“There is perhaps no well-to-do man whose death is not secretly hoped for by avid heirs and often his own children; no ship at sea whose wreck would not be good news to some merchant; no firm that a debtor of bad faith would not wish to see burned along with all the papers it contains; no people that does not rejoice about the disasters of its neighbours. Thus do we find our advantage in the detriment of our fellow-men, and someone’s loss almost always creates another’s prosperity. But what is still more dangerous is that public calamities are awaited and hoped for by a multitude of individuals. Some want illnesses, others death, others war, others famine. I have seen atrocious men weep with sadness at the probability of a fertile year; and the great and deadly fire of London, which cost the life or goods of so many unfortunates, perhaps made the fortune of more than ten thousand people.”
-- Jean-Jacques Rousseau, Discourse on the Origin and Foundations of Inequality among Men.
The only obstacle to the Templeton Way seems to be emotions. It takes a lot of 'courage' to swim against the tide.
Would you buy Japanese stocks now? Toyota stocks seems to have dropped off a cliff.
Kajima is up 32% today. Obayashi is up 16%. Taisei Corporation is up 23%.
What's the common factor? All are construction companies. All stand to make a lot of money in the next few years, as there will be no lack of rebuilding work in the next few years (bridges, roads, homes, ports, schools etc).
What exactly are the consequences of the earthquake on other Japanese companies? Insurance companies will take a bad hit, but actually, surprise, surprise, there won't be that much impact on many other types of companies. Today, in many parts of Japan other than the north, many people are going back to work.
The stock market is plunging now, but a lot of that is (Templeton would say) a knee-jerk reaction out of fear and ignorance. Following a big, news-grabbing negative event, the investors' collective reaction is almost always more extreme than warranted. This creates buying opportunities.
My heart goes out to Japan and the people. May God bless them with courage and strength to overcome this difficult period.
"My heart goes out to Japan and the people."
Wow, that's really generous of you - I am sure they really needed that.
"May God bless them with courage and strength to overcome this difficult period."
I'm sure he will; after all, it would be a bit mean to send an earthquake AND a tsunami, and then skimp on the blessings afterwards...
I know u are sadden by the tsunami
After election just like the 2006 election they will increase their pay 25% now they had increase the president pay 26%
Everything will increase to support their pay
Because of monopoly of power
Life will be tougher
Mr Brown the blogger who wrote for Today news said everything went up, was terminated
So the newspaper always write the positive news and covered the negative news
We so many people they need to support like the huge MLM
Monopoly of business always bad for comsumer
whenever price increase u got to use it because of no alternative
Some the money must come from to support their lifestyle
I really admired the privilege few, can sleep in the parliamen, gice excuse not to attend got full time job, can do part time and still get high pay and the garanteed contract is five year.
Previous lives much have do lots of good deeds
Hope that they take my baiats, later five years i can take back few times more he he he
Last few election, those 50 percent don't need to vote are lucky.
Why you don't vote?
Those i can buy over with baits i buy over them,those fifty percent i can't buy over them i take care of them the other ways
United by money pse come forward, united by morals pse go to opposition
How to stop the opposition from coming in?:
Get those votes from the stronger wards to top up the weaker warads
I was wondering if Templeton would buy Japanese stocks now?
Extreme fear. Extremely good companies (at least some of them) and a people known to industrious.
Is Japan a Templeton buy now?
Lucky:
I bought some today. Or rather, I am buying some in a few days' time (that's because they take a few days to process a CPF investment for funds).
I bought DBS AM Japan fund. But only a small amount, since I am, after all, not Mr Templeton.
Hi Mr Wang,
The trouble with investing the Templeton Way is sticking to it when you buy too early. Cheap becomes cheaper and without holding power (financial and emotional), one can end up selling at the bottom.
Sometimes, it turns out to be a value trap and cheap really deserves to be cheap.
GIC and Temasek probably thought they were investing the Templeton Way when they bought UBS, Citibank and Merrill Lynch during the 2008 Western financial crisis. Unfortunately, they got into a value trap despite the concentrated brainpower they employ.
I think it is easier for individual retail investors to buy a fund like what you did for Japan instead of specific stocks like what our Sovereign Wealth Funds did.
I wish you good fortune in your investments in Japan.
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