Sir John Templeton, was called “arguably the greatest global stock picker of the century” by Money Magazine. With his astute investment strategies and an unwavering belief in the power of long-term growth, Templeton achieved phenomenal success throughout his career. Today we delve into the life and achievements of Sir John Templeton, highlighting his entrepreneurial spirit, investment prowess, and enduring philanthropic legacy.
Early Life and Entrepreneurial Drive:
Born on November 9, 1912, in Winchester, Tennessee, to Vella and Harvey a lawyer, entrepreneur and real estate investor. John demonstrated his business acumen from an early age. He engaged in ventures such as selling firecrackers at the age of 8 and wine at 17, showing his innate knack for commerce and entrepreneurship.
Overcoming Adversity and Early Investments:
John attended Yale University until one day his father lost everything on a failed bet on the Chicago Futures Exchange. Determined to continue his education, Templeton worked multiple jobs and even played poker to fund his college tuition. These experiences instilled in him the importance of measured risk-taking, a trait he would carry into his investment career.
Education and Global Exploration:
His academic journey continued when he earned a Rhodes Scholarship to study Law at Oxford University. Following his studies, Templeton embarked on extensive travels worldwide, including visits to Japan, the Middle East, and China. These explorations would later inform his investment decisions in emerging markets.
Wall Street and Early Success:
Shortly after, he returned to America and married Judith Folk. They moved to New York and furnished their home with furniture off the street and from Goodwill.
In 1937, Templeton began his Wall Street career at Fenner & Beane, a firm that would eventually become Merrill Lynch. While working there he would make a famous bet.
The year was 1939 and German tanks were rolling into Poland. John saw that war was on the horizon so he borrowed $10,000 ($218,000 today) from his boss.
He bought shares in 104 stocks trading for less than $1. Of these 37 were bankrupt. He made money on all but 4 stocks turning that $10,000 into $40,000. He had an average holding period of around 4 years.
He would later explain his investment: “During war, everything that was in surplus, and therefore unprofitable, becomes scarce and profitable”.
Tragedy
In 1940 John purchased a small investment firm Templeton, Dobbrow & Vance. By 1951 The firm prospered and so he decided to take his wife Judith on a vacation to Bermuda.
Tragically Judith was struck by a truck while riding a motorscooter. She died shortly after.
John would go on to marry Irene Buttler in 1948.
Creation of Templeton Growth Fund and Global Vision:
In 1954, John established the Templeton Growth Fund, laying the foundation for his distinctive investment approach. He recognized the potential of international markets, including Japan, when others dismissed them as mere manufacturers of cheap imitations. But not John, he saw companies with potential such as Hitachi and Fuji Film
Japanese stocks were trading at an avergae PE of 4 compared to US stocks trading at PEs of 19. And they were growing faster than US stock too! He invested 60% of his fund in Japanese stocks.
Core Principles and Investment Philosophy:
Templeton adhered to two guiding principles in his investment journey. First, he avoided investing in communist nations, favoring free-market economies. Second, he recognized the detrimental impact of high inflation on economic stability and focused on countries with lower inflation rates.
Strategic Moves and Contrarian Thinking:
In 1968, Templeton departed from Wall Street environment and relocated to The Bahamas. He believed that if you want your performance to be better than average, you have to do something different from other money managers. This unconventional approach allowed him to navigate market cycles successfully, including predicting the stock market’s resurgence during a period of pronounced pessimism in the late 1980s.
In 1979 Businessweek published a cover with the title “The Death of Equities” after a decade of the stock market going sideways. Pension funds won permission to quit stocks and bonds for real assets. John saw this as a sign that the point of “maximum pessimism” was close. The Dow Jones was at a P/E ratio of 6.8x – the lowest level in recorded history up to that point.
In 1982 John made a bold prediction that there would come a great bull market with the Dow reaching 3,000 over the next 10 years – a fourfold increase. He explained:
“Assuming long-term average growth rates of 7 percent and inflation staying in the neighbourhood of 7 percent, profits would increase 14 percent nominally per year. This alone could almost account for a rise to 3,000. However, if the P/E ratio was to get closer to its long-term average of 14, starting from this low a level, 3,000 didn’t seem that far-fetched anymore.” – Broken Leg Investing
John was right, The Dow reached 3000 in 1991.
The Bursting of the Bubble
In the 1990s many investors felt the market was overvalued but it just kept going up. John believed the bubble would soon burst but wanted to get his timing right. He flipped his concept of investing at maximum pessimism and instead shorted at maximum optimism.
He looked at recent IPOs that had risen steeply in price and where insider stock was about to come out of escrow. Insiders were likely to sell acting as a catalyst for heavy selling. John was right again, the bubble burst John made $90 million shorting the tech industry.
Philanthropic Contributions and Spiritual Pursuits:
John’s achievements extended beyond the realm of finance. He established the Templeton Prize in 1972 and the John Templeton Foundation in 1987, aiming to bridge the gap between science and faith. These initiatives brought together remarkable minds to explore fundamental questions about human existence and the universe. Templeton’s philanthropic endeavors reflected his deep spirituality and commitment to the betterment of humanity.
Past winners of the Templeton Prize include: –
- Mother Theresa
- Writer Aleksandr Solzhenitsyn
- Physicist Charles Townes
- and The Dalai Lama
Legacy and Recognition:
Throughout his life, John received numerous accolades for his contributions to finance, philanthropy, and spiritual inquiry. Notably, he was knighted by Queen Elizabeth II in 1987 for his outstanding achievements. Templeton’s writings, including “The Templeton Plan: 21 Steps to Success and Real Happiness” and “Discovering the Laws of Life,” continue to inspire aspiring investors and individuals seeking personal growth.
Conclusion
Sir John Templeton’s remarkable journey from modest beginnings to global investment success serves as a testament to his tenacity, strategic acumen, and principled approach to investing. His ability to identify opportunities in times of adversity, embrace contrarian thinking, and maintain a long-term perspective set him apart as a legendary investor. Furthermore, Templeton’s dedication to philanthropy and the pursuit of spiritual understanding demonstrates his desire to make a positive impact on society. The legacy of Sir John Templeton continues to inspire and guide generations of investors, entrepreneurs, and seekers of truth.
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