In Memoriam - Sir John Templeton

Remembrance
Templeton: Sir Real to the End
Stephane Fitch 07.09.08, 12:17 AM ET

Sir John M. Templeton is gone. The 95-year-old investor and philanthropist died Tuesday at a hospital in Nassau, the Bahamas. For me, the news comes with a real touch of regret.

I’ve been coming to terms with a couple of Templeton’s powerful, simple ideas ever since I interviewed him in the Bahamas seven years ago. I keep a letter he wrote me near my desk. Occasionally I’ve thought about flying down to see him again. Too late now.

The old Tennessean came about as close as anybody can to figuring out the markets. Then he set out to making sense out the rest of life.

Unless you’re a religious scholar or an old-time investor, you may not know Templeton well. He was a mutual funds man. His flagship Templeton Growth Fund returned an average of 14.5% over four decades. And Templeton popularized the idea of overseas investing.

He sold the mutual fund company to Franklin Resources in 1992. He gave up his American citizenship, was knighted by Queen Elizabeth and spent his retirement writing books about spirituality and giving away a fortune to people who advanced our understanding of spiritual matters. Recipients of his respected annual Templeton Prize include Mother Theresa and author Charles Taylor.

I visited Templeton in his home in early October 2001. Thousands of innocent people had just been killed by terrorists in New York, Pennsylvania and Washington, D.C. It was a mad, mixed-up time. Yes, we’d all seen the heroics and humanity that followed the attacks. But there was so much heartbreak and anger. And there was the drumbeat of coming war. People were confused. I certainly was.

Now here I was venturing down to see this revered British knight to bother him for investing tips. The tech bubble had burst, and the rest of the market was plunging, too. Maybe Templeton, who’d always thrived in moments of what he called “maximum pessimism,” could figure out how to make a little money off all the misery.

Templeton and I sat together for perhaps a little over an hour. He sipped a Coca-Cola and talked quietly with me. Just like so many conversations at that time, ours turned to 9/11. He was dismayed by the murderous attacks, he said. But he didn’t hate the 9/11 terrorists. “For 80 years I've tried to train myself to feel unlimited love for every human being on Earth, with never any exception,” he said. Nineteen angry hijackers weren’t going to change that.

If Osama bin Laden and his people were behind the attacks, then they should face justice and perhaps even be executed. But we should pray for them, he said. He seemed genuinely troubled by the bombing in Afghanistan.

It was breathtaking. At a time when people wanted to see great swaths of the Middle East carpet bombed, Templeton was talking about praying for bin Laden and his sympathizers. He wasn’t confused, as I was, about his fellow man.

Then Templeton rattled off a half-dozen investment ideas that later proved to be among the best I’ve written about in a decade at Forbes. He suggested buying stocks in beaten-down developing markets like South Korea and Thailand. Don’t bother with picking them yourself, he said. Buy cheap mutual funds that focus on those markets instead.

Closer to home, he suggested buying U.S. Treasury Strips. These are bonds that pay no interest, just a single balloon payment in an amount equal to the face value of the bond when they mature.

Then came the master stroke: Buy Canadian Strips. In fact, buy them with money borrowed from Japan.

This advice was coming from a guy who was not fond of debt. His house in the Bahamas was paid off. Generally, he explained, going into debt is a bad move. But do it if you’re sure the reward is worth the risk. (It was: two years later, the margin-debt-fueled bet on Canadian Strips had produced an 80% annualized return. All the rest of Templeton’s ideas trounced the markets as well, rising 13% to 30%.)

What, I asked greedily, was his favorite investment metric? Did he have a magic formula, some obscure measure of value that would unlock the secrets of the market to the rest of us mere mortals? He sure did. “It’s the price-earnings ratio,” he said.

Huh? What about growth? Price-earnings ratios, which measure a stock’s price against past earnings per share, can be deceiving, Templeton admitted. So figure out what the company will earn this year or next year, he said. And look at the ratio of price to those future per-share earnings instead.

Then buy the stocks and bonds with the lowest P/E ratios you can. Less than 10 is good. Less than 5 is even better.

Templeton reportedly got his start buying $10,000 worth of stock in 1939, including 34 in bankruptcy. He was fond of buying investments at moments of maximum pessimism, as he called it.

Get that? Love all your fellow men infinitely. Buy your investments at very, very low P/E multiples. Both take courage. Both pay rich rewards.

An art director at Forbes, Steven Ramos, suggested we give my article about Templeton the title, “Sir Real.” After we printed it, Sir John wrote me to say that he was especially pleased with that title. “It will be a pleasure to have you visit me in the Bahamas,” he wrote, “in the future.”

It’s a trip I’ve made in my imagination many times.

Templeton Saw It Coming
Matthew Kirdahy, 07.08.08, 4:55 PM ET

Sir John Templeton

Right now, amid all the doom and gloom, is when John Templeton would've made his move.You might even say he saw it coming.

Templeton, a pioneer in global investing, died Tuesday at age 95. Four years earlier, he laid out a strikingly accurate prognosis for the U.S. economy for Forbes Magazine. (See "An Investment Legend's Advice")

In February 2004, Templeton, a true contrarian, told Forbes that his chief concern was the U.S. consumer. He said Americans had taken on too much credit-card and mortgage debt. Templeton even said home prices would fall and defaults rise. "When I was young, in the three years after 1929, a high proportion of people lost their homes in foreclosure," he said. "It's likely to happen again. It's not abnormal. It's cyclical, and it will put pressure on all prices."

It's also when opportunity knocks.

Templeton always looked for "maximum pessimism," according to a 2001 Forbes report. (See "Sir Real") He got rich by buying when everyone else was selling. He won big buying Ford Motor when the automaker's finances were reeling in 1978. He poured money into Peru when it was still awash in communists in the 1980s. He shorted dozens of technology stocks in 2000 when they were still strong.

Templeton was so good at what he did you'd think it was his one true love. Maybe not.

He started his career on Wall Street in 1937 and went on to create several successful international funds. In 1954, Templeton established his growth fund that invested in emerging markets. He ultimately sold the Templeton Funds empire in 1992 to Franklin Resources to devote his time and fortune elsewhere.

Away from being a market soothsayer and fund manager, Templeton was also a stalwart Presbyterian and philanthropist. In 1987, he started the John Templeton Foundation, the success of which made him an honorary knight bachelor by Queen Elizabeth II. The foundation was established to invest in spirituality. It was Templeton's mission to bolster spiritual thinking and research through donations to institutions that explored the laws of nature and the universe.

Templeton's philantrhopic endeavors and vast business knowledge gave people hope. He likely would've been able to give Wall Street some now