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Templeton’s Touch

Yesterday in my post I discussed a piece of advice that I received years ago that helped to form the foundation of my value perspective by studying not only the successes of various investors but also their failures.

Sir John Templeton died yesterday at the age of 95 after a lifetime of involvement in global equity markets, philanthropy and founded the highly successful Templeton Growth Fund, Templeton Prize and Templeton Foundation.

John Templeton was one of the first investors that I focused on during my early years of studies on value investing and his global focus, investing discipline and contrarian habits are well observed in both my current discipline and a few of my Value Rules.

Rick at Value Discipline has done an excellent job today of summarizing nearly two dozen lessons that Templeton offered to William Proctor for his publication titled The Templeton Touch in 1983.

  1. For all long-term investors, there is only one objective-“maximum total real return after taxes.”
  2. Achieving a good record takes much study and work, and is a lot harder than most people think.
  3. It is impossible to produce a superior performance unless you do something different from the majority.
  4. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.
  5. To put “Maxim 4” in somewhat different terms, in the stock market the only way to get a bargain is to buy what most investors are selling.
  6. To buy when others are despondently selling and to sell what others are greedily buying requires the greatest fortitude, even while offering the greatest reward.
  7. Bear markets have always been temporary. Share prices turn upward from one to twelve months before the bottom of the business cycle.
  8. If a particular industry or type of security becomes popular with investors, that popularity will always prove temporary and, when lost, won’t return for many years.
  9. In the long run, the stock market indexes fluctuate around the long-term upward trend of earnings per share.
  10. In free-enterprise nations, the earnings on stock market indexes fluctuate around the book value of the shares of the index.
  11. If you buy the same securities as other people, you will have the same results as other people.
  12. The time to buy a stock is when the short-term owners have finished their selling, and the time to sell a stock is often when the short-term owners have finished their buying.
  13. Share prices fluctuate more widely than values. Therefore, index funds will never produce the best total return performance.
  14. Too many investors focus on “outlook” and “trend.” Therefore, more profit is made by focusing on value.
  15. If you search worldwide, you will find more bargains and better bargains than by studying only one nation. Also, you gain the safety of diversification.
  16. The fluctuation of share prices is roughly proportional to the square root of the price.
  17. The time to sell an asset is when you have found a much better bargain to replace it.
  18. When any method for selecting stocks becomes popular, then switch to unpopular methods. As has been suggested in “Maxim 3,” too many investors can spoil any share-selection method or any market-timing formula.
  19. Never adopt permanently any type of asset, or any selection method. Try to stay flexible, open-minded, and sceptical. Long-term top results are achieved only by changing from popular to unpopular the types of securities you favour and your methods of selection.
  20. The skill factor in selection is largest for the common-stock part of your investments.
  21. The best performance is produced by a person, not a committee.
  22. If you begin with prayer, you can think more clearly and make fewer stupid mistakes.

If you haven’t read the article by Rick or The Templeton Touch I would strongly encourage novice and experienced investors looking for helpful insights in today’s markets to take note of the extensive experience Templeton offered during his life.

At times some of the simplest strategies yield the most consistent results. Returns are often measured far too often over a short period of time and the long-term focus of individuals such as Templeton serve as an important reminder to young investors to look more broadly at the whole picture.

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