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JOHN TEMPLETON UNPLUGS THE STOCK TICKER
While most of America frets over an economic storm that won't seem to blow over, legendary mutual-fund manager John Marks Templeton sees nothing but a clear horizon. And as usual, his independence comes from a matter-of-fact assessment of the long term. "The next 10 to 20 years will be the most prosperous period in world history," he says confidently, noting that as communism withers and the threat of nuclear war recedes, global stores of scientists, doctors, and managers have never been richer. "The place to invest is always the point of maximum pessimism," he says.
For 52 years, investors have been able to count on Templeton to find that point--no matter where it was--and capitalize on it handsomely. Known as the dean of global investing, Templeton has long dazzled investors by unearthing value in companies tucked away in far-flung countries. Ten grand plunked into Templeton's first mutual fund in 1954 would now be worth more than $2 million. "He's an extremely patient investor," notes William E. Holzer, portfolio manager of Scudder Global Fund Inc. "Lots claim to be long-term investors. Templeton really is."
But on July 31, he finally cashed out. The man affectionately referred to in the industry as "Mr. T" signaled the end of his career by merging his celebrated money-management business, Templeton, Galbraith & Hansberger, with Franklin Resources Inc. in a deal that will pay Templeton shareholders $913 million. Templeton, his partner John Galbraith, and his son John Jr. will get most of it. Together, they own 70% of the firm.
MIDAS TOUCH. His decision surprised few: At 79, Templeton has become more a figurehead than a day-to-day manager of the business. Both clients and colleagues have been quick to remind him of his mortality. "They've been asking what happens when I'm not around," says Templeton, who will stay on in an advisory role.
Mr. T certainly hasn't lost his touch for picking stocks. Over the past year, his $3.1 billion Templeton Growth Fund has returned an impressive 20.3% to shareholders, vs. 9.6% for its peer group. It's no secret, though, that his firm--which has $21.3 billion in assets spread over 78 funds--has looked tired lately. While other funds, such as Oppenheimer and Putnam, lowered their commissions to attract new investors, Templeton has responded slowly. And though investor interest in global funds peaked in 1989, it's now on the wane. The result: flat earnings and an outflow of an estimated $300 million in assets last year. Says Don Phillips, publisher of Morningstar Mutual Funds: "They haven't capitalized on the most recent mutual-fund boom."
That's unusual. Templeton began winning investors' wallets four decades ago by snapping up shares that were overlooked or scoffed at by rivals. He routinely searched as far away as Jordan, Malaysia, or Indmnesia for prospects. In the early 1970s, conventional wisdom still held that Japanese industry merely cranked out poor imitations of U.S. products. Templeton, though, noticed that "copycats" such as Hitachi Ltd. and Matsushita Electric Industrial Co. were wildly undervalued. "I always try to buy where people are urgently selling," he says. "If you buy where people are optimistic, you can't get a bargain."
BIG POT. Templeton's views are as uncomplicated as the hilly countryside of Franklin County, Tenn., where he was born in 1912. The son of a self-taught lawyer and cotton ginner, he attended Yale University and later moved on to Oxford University as a Rhodes Scholar. In 1936, he began globe-trotting with cash he had won playing poker, but returned to the U.S. a year later to join a Dallas-based oil-prospecting business started by an Oxford buddy. By 1941, he had enough socked away to found his own money-mangement firm.
Gambling and prospecting aside, Templeton has long been a devout Presbyterian. He sponsors the Templeton Prize for Progress in Religion, which gives away more than $1 million annually to religious innovators. Most of his $440 million take in the Franklin deal is already earmarked for 30-odd charities.
Don't take Templeton's rampant optimism about the future of the global economy as a cue to rush into the market. These days, the point of maximum pessimism isn't on the Big Board (table). Investors have bid away the obvious bargains there already, he says. He predicts that the Dow Jones industrial average has a "fifty-fifty" chance of hitting 6000 by the year 2000--only a 7% average annual increase. But Templeton still has plenty of ideas about where to invest. And if Franklin investors are lucky, he'll pass some on before he goes.TEMPLETON'S TIPS
ALUMINUM STOCKS Russia now is dumping aluminum on the market, but once this
extraordinary event is past, aluminum shares could then start to rebound
AUSTRALIA Bank stocks there are trading around four times earnings, while those
in North America go for upwards of 18
NEW ZEALAND Share prices are one-third prior levels as the nation struggles
through a long economic slump. But it boasts a highly educated population and
lots of natural resources
PRECIOUS METALS Investors often flee toward gold and its cousins in uncertain
times. But with global tensions easing, there's little reason to invest in them
REAL ESTATE Hardly a bargain yet, except in markets that have been thoroughly
depressed: Houston, Dallas, and South Florida
Ron Stodghill II in New York