Investing the Templeton Way: The Market-Beating Strategies of Value Investing's Legendary Bargain Hunter by Lauren C. Templeton & Scott Phillips

Author:Lauren C. Templeton & Scott Phillips [Templeton, Lauren C. & Phillips, Scott]
Language: eng
Format: epub
Publisher: McGraw-Hill
Published: 2008-09-14T16:00:00+00:00

Just as Uncle John pointed out that investors who longed for the buying opportunity of 1932 totally missed out on the stock market of the early 1980s, it is important to adopt a mentality that you will examine stocks that others will not, whether an individual instance or an entire country’s market full of stocks. For some reason, even those who get the idea that when stocks are depressed it is the correct time to buy still resist doing so. It is an age-old phenomenon, and a perverse one at that, that when stocks go on sale, no one will buy them. Can you imagine teenage girls fleeing a mall, in fact pushing each other out of the way to do so, just as the shops announce that everything is being marked down 50 percent? Of course not; in fact, that would create the opposite experience. Yet this is exactly what happens in the stock market when stocks go on sale.

The way to overcome this human handicap is to rely on quantitative reasoning versus qualitative reasoning. Uncle John always told us that he was quantitative in practice and “never liked a company, only stocks.” If your investing methodology is based primarily on calculating the value of a company and looking for prices that are lowest in relation to that value, you would not miss the opportunity found in the death of equities market. However, if you take your cue only from market observers, newspapers, or friends, you will be dissuaded from investing in stocks where the outlook is not favorable. In contrast, if you are independent-minded and focus primarily on numbers versus public opinion, you can create a virtuous investment strategy that will endure in all market conditions. Put another way, if you are finding stocks that are trading at their all-time lows relative to their estimated worth and you find that all other investors have quit the market for those stocks, you are exploiting the point of maximum pessimism, which is the best time to invest.

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