Investing Lessons from John Templeton (1912-2008)

Posted by: Ben Steverman on July 8, 2008

John Templeton, the philanthropist and legendary investor, died today. It’s difficult to take a comprehensive look at a man who squeezed a lot of life into 95 years, so I’ll focus on Templeton the investor:

1. Templeton’s historic legacy

Many obituaries focus on Templeton’s philanthropy. But I think this is because Templeton lived so long that few now remember his most significant role in history, as a popularizer of the mutual fund.

When Templeton started his career, Americans hated Wall Street. After the 1929 crash and the Great Depression, the stock market’s recent performance justified many of these suspicions. The market seemed to operate for the benefit of insiders and the very wealthy.

Templeton didn’t invent the mutual fund, but he made it popular and reputable.

“It’s fair to say that the evolution of the mutual fund has completely changed the investing landscape,” said Stephen Horan, head of private wealth at the CFA Institute, when I asked him about Templeton’s legacy. Mutual funds now feel like an obvious and indispensable part of the investing landscape. But before the 1950s, the vast majority of stocks were held directly by individuals, most quite wealthy. Templeton “helped popularize [mutual funds] and put [stocks] in the hands of the individual investors,” Horan said.

2. His gutsy investing style

With typical investors wary of Wall Street ripping them off, I’m sure that one thing that reassured investors in Templeton’s mutual funds was his staid, religious persona.
But the main selling point was certainly his investing record. The Wall Street Journal obituary says:

A $10,000 investment in the storied Templeton Growth Fund in 1954 would have grown to $2 million by 1992, when Sir John sold his company to Franklin Resources, the San Mateo, Calif.-based fund giant, for $913 million. That translates to an annualized 14.5% return.

Templeton was a value investor, meaning he was great at picking unfavored stocks and holding onto them long term for great returns. Like another investor in the next generation, Warren Buffett, Templeton was great at ignoring the conventional wisdom.

In his New York Times obituary, this sentence caught my eye:

In 1939, when World War II began in Europe, the 26-year-old investor borrowed $10,000 and bought 100 shares each in 104 companies that were selling at $1 a share or less, including 34 in bankruptcy. A few years later, he made large profits on 100 of the companies; four turned out to be worthless.

Wow, I can’t imagine a scarier time to be investing in stocks than 1939. Still dazed from a worldwide financial depression, the world was embarking on the bloodiest war in its history, and yet Templeton made a big bet on beaten-down stocks — using borrowed money.

3. His worldly outlook

Wall Street has a reputation for conservatism, but the greatest investors are the often the most open-minded. They also often stay far away (either geographically or philosophically) from Manhattan, where the Wall Street herd mentality can obscure your judgment. Templeton embodied these traits, to the benefit of his investing track record. Horan called Templeton one of “the great contrarians of the investment world.”

He renounced his American citizenship and lived in the tax haven of the Bahamas. From the NYTimes:

Sir John said his investment record improved after he distanced himself from Wall Street and no longer worried about the tax consequences of his decisions. He was an early investor in Japan in the 1960’s and later in Russia, China and other Asian markets. He sold large holdings before the technology bubble burst in 2000, and warned several years ago that real estate prices were dangerously high.

Still, maintaining independence from Wall Street groupthink is very difficult, especially as all investors read the same newspapers, magazines and (now) watch the same web sites and cable channels.

I wonder if Templeton’s deep interest in religion — in which he was also famously open-minded — helped him keep a sense of distance and perspective. Templeton was a master investor, but he didn’t allow investing to dominate all aspects of his life.

Reader Comments

Rozanne E. Folk

July 8, 2008 8:30 PM

My uncle was a man of deep convictions. He baled cotton to afford his college tuition - he never turned from hard work. His was a Humble Approach - and one of courage because he was never afraid to think outside the box.

John Templeton was very devoted to his family - each and every one of us. He was a great listener and thoroughly understood humility.

I will miss a kind man who loved his family.

JC Reynolds

July 8, 2008 8:59 PM

Sir John Templeton will always be heralded as a savvy investor but his faith based background should be equally noted. Nowadays, we sure could use more like him.

Domenic Laurenzi

July 9, 2008 12:23 AM

Sir John was the most infdluential person in my career as an Investment Advisor. He was patient, never foregoing his strategy when others were changing their's. His accomplishments were equal to, if not surpassing those of Warren Buffet; but his humility precluded him from seeking the limelight. He was also a significant humanitarian

He will surely be missed.

Daniel

July 9, 2008 2:28 AM

Although I strongly recognize Mr. Templeton's achievements as an investor I believe IMHO that his judgment regarding religion and science, expressed in his Templeton prize, was very much a disservice to the human race. I am really sorry for this part of his life and I hope we wont continue on this path.

DIANE

July 9, 2008 9:53 AM

JOHN TEMPLETON HAD BEEN A SPECIAL PERSONAL FRIEND OF MINE THAT I GOT TO SPEND SOME VERY PERSONAL TIME WITH. HE WAS AN INCREDIBLE MAN WHO GAVE ME LOT'S OF GREAT INCOURAGMENT. HE LISTENED TO EVERY WORD I ALWAYS HAD TO SAY. I WILL MISS HIM TERRIBLY! HE TAUGHT ME SO MUCH. I WILL TRESURE THE NOTES AND LETTERS THAT HE HAS WRITTEN TO ME OVER THE LAST 15 YEARS. I WAS HONORED AND I CONSIDER, MYSELF VERY FORTUNATE TO HAVE BEEN ABLE TO SPEND GREAT PRIVATE TIME WITH HIM.

LOVE TO YOU FOREVER IN MY HEART ALWAYS.

LOVE DIANE

Marshall

July 9, 2008 12:30 PM

Sir John's quote says it all! “The more we give away, the more we have left”

Russ

July 9, 2008 12:59 PM

I'm sure that many who knew of Mr. Templeton would like to aknowledge his courage as an investor and hold their nose on the religious bits. The "Human race", certainly is not of one opinion and, as such, is not on a singular path. Sir John was of an opinion that his occupation and his faith were inseparable. He forged a path based on this and did his best to encourage others by his example. He most certainly wasn't sorry about this path and I can't imagine that he was of an opinion that "WE" -the human race- were on this path together.

Now that he has died, just as before, we each forge our own path. As for me, I appreciate and his path.

Vijay

July 9, 2008 1:06 PM

I agree with Daniel. Late Mr. Templeton's success is quite admirable purely from an investment perspective. New generations can learn a lot from his value investment strategies. However, Mr. T's wealthy non profit foundations continues to harm Science and youngsters' minds with outdated religious myths and promote illogical reasoning. I hope these foundations realize the great harm they cause to humanity and correct their funding direction.

Jerry

July 9, 2008 1:26 PM

Daniel,
I don't know how you could disparage a great man by saying that his belief in religion, which was at Sir John's core, did a disservice to the human race. I pray for you Daniel, that you will explore religion and try to disprove it yourself, only to find that Sir John had a firm grasp on the reality that we live in.

It sounds as if money is your religion, and Sir John realized the danger in this in being an investor. It is only through his wise eyes can we discover that religion and spirituality supercede money as a religion. Money cannot buy love and love is truly what people need.

Russ

July 9, 2008 1:55 PM

I'm sure that many who knew of Mr. Templeton would like to aknowledge his courage as an investor and hold their nose on the religious bits. The "Human race", certainly is not of one opinion and, as such, is not on a singular path. Sir John was of an opinion that his occupation and his faith were inseparable. He forged a path based on this and did his best to encourage others by his example. He most certainly wasn't sorry about this path and I can't imagine that he was of an opinion that "WE" -the human race- were on this path together.

Now that he has died, just as before, we each forge our own path. As for me, I appreciate and his path.

Julian

July 9, 2008 1:59 PM

Given the choice to believe in The Almighty Dollar or that Great Spirit that seeks to feed any and all who seek that side of their heart then I will take the Heart. I can always get a job, save and invest. I have lived and lost and got it back. I didn't do it alone.

Sadness awaits the fool who loves the money!

Tim Donnelly

July 9, 2008 2:18 PM

John Templeton was a truly great man in that his success did not define him; he defined himself through his humble devotion to family and to his Faith. By giving of himself and his treasure, he enriched us all. Although I only knew him through his interviews and his niece's book, he was one of the most influential investors in my life. I can only aspire to have such a profound impact on the world. He will be missed even by those who never knew him personally.

Marsha A Grimes

July 9, 2008 2:23 PM

I am really sorry for the snobs who belittle his religious beliefs. I pity their ignorance and intolerance. Sir John would no doubt feel the same. I just finished a book regarding his life and investing philosophy. In neither his beliefs or investing acumen did I find anything to critisize. He will be missed.

Sam

July 9, 2008 4:32 PM

The integrity of Templeton's legacy includes all of him. The pathetic arrogance of those who can't seem to tolerate the widening power of the Creator's input to humanity so aptly understood by Sir John does honor neither to him nor to the rest of us. A little humility, a little acknowledgement of the inadequacies of human wisdom, and an openness to the Divine is what allows for real progress in the human family. There are plenty of examples of religious infamy we all will admit. If power corrupts people, religious power corrupts terribly. But mistakes are just that--mistakes.
There is hardly a greater superstition than the one that believes there is no god.

jim

July 9, 2008 5:03 PM

SCIENCE AND RELIGION ARE NOT IN CONFLICT & J. TEMPLETON WAS TRYING TO SHOW THATBY ENDOWING THE WISE MEN (&WOMEN) WHO UNDERSTOOD THAT. YOU NEED BOTH SCIENCE & RELIGION & THOSE WHO DON'T UNDERSTAND THAT ARE ARROGANT FOOLS TO BE PITIED.

Bobby

July 9, 2008 10:37 PM

what was his foundation in science like? Did he have a science degree?

vijaykrishnakumar

July 10, 2008 4:13 AM

Sir John Templeton is one of a kind who taught the humanity the value of love and life and the essence of simple living and high thinking.his investing
methods are legendary and he gave a perpetual life to his business.

may his soul rest in peace

Dan

July 10, 2008 7:12 PM

If science and religion lived in harmony the world would still be flat and the sun would still revolve around the earth. Science has repeatedly proved religion's falicies. To each his belief, to all teach science.

caroline16

July 11, 2008 3:48 AM

Sir John Templeton Was an great person in the world as an Investment Advisor. I really heard a very sad news today about the death of him.I liked his investing style.
=========================================
caroline16
[url="http://articles.securitymailbox.com/category/identity-theft"]
stop identity theft[/url]

Albert

July 12, 2008 11:30 AM

Oh please! He was lucky he found *anyone* to lend him money back in 1939 -- if he did not make it through the war, there was nothing to pay back anyway, and he was only 26 so he could start over if it all crashed but he wsa still around. Lots of upside, the downside was what it was.

Post a comment

 

About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

BW Mall - Sponsored Links

Buy a link now!