Sir John Templeton, who made his fortune through investing, is known for saying that if you want to have better performance than the crowd, you must do things differently than the crowd. You have to develop your own investing style. One that is not based on the current fluctuations of the market, but on the long-term potential for stocks to grow.
This advice was not lost on his great niece, Lauren Templeton. Templeton, Founder and President of Templeton & Phillips Capital Management LLC, told students in George Athanassakos’ value investing class it takes a certain type of person to succeed in investing – one who doesn’t panic during major market corrections (declines of stocks, bonds, commodities, or the market index) and instead sees them as an opportunity to buy stocks at bargain prices. Doing so can be painful, she warned, but the rewards are worth it if you can endure it.
“Do you have the capacity to suffer? Some people don’t. So it’s a question you need to ask yourself. Do you have that personality?,” she said.
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Templeton walked the students through some major market corrections in the past 100 years, such as the stock market crash of the Great Depression, the 1970s bear market, and the 2008 financial crisis. During these corrections investors often lost 50 per cent or more of their investments. She said most investors panic and sell their investments at times like this, but that’s when value investors should buy more stocks at bargain prices.
But Templeton said such a response is learned over time and requires patience and a capacity to tolerate pain.
“You have to suffer these painful events in the market. You have to put capital to work and wait to reap the rewards from it. If you do that enough times, you start anticipating the reward on the other end,” she said. “You can condition your brain to be a good value investor, but it is a painful process.”
Templeton said she learned this lesson from her Great Uncle John who, after the September 11 terrorist attacks, asked her to do an analysis of all the major airline companies and buy stock from all those that declined at least 50 per cent that day.
She also outlined three attributes, among others, that made Sir John Templeton a successful investor:
A bargain-hunting mentality – Even though Sir John Templeton was a billionaire, he was known for having holes in his socks or sports coats because he wouldn’t buy new ones. He had made $200 million through investing in Kia Motors, but wouldn’t buy a Kia car because he thought they were too expensive. Lauren Templeton once asked him why he wouldn’t buy things even when he had so much money and his answer was simple: He was saving for the opportunities.
“Whether he was buying a car, a coat, or a house, he was a bargain hunter always,” she said. “It was so ingrained in him. If you’re going to be a value investor that needs to be your approach.”
The ability to retreat from daily pressures – Following news of the September 11 terrorist attacks and subsequent market shut down, most investors were worried about their investments. But Sir John Templeton took his daily one-hour walk in the ocean like it was just an ordinary day.
“Most value investors have some mechanism where they totally remove themselves from the market and that’s really important, especially in this day and age. It’s really hard to step back and focus on the long term when people have constant access to you and want a response now. You spend your day putting out fires instead of thinking about the long term,” she said. “Sometimes you have to get up and walk away.”
A simple investing strategy – Sir John Templeton’s investment strategies were always simple. He invested in companies with the potential for long-term growth and he read the news of current events and markets late so he wouldn’t react to it.
“If someone makes a complex presentation on their company, that’s usually a good sign not to invest in it,” she said.
