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Investing The Templeton Way

Chapter 1:

- The right question is: Where is the outlook most miserable? The
obvious application of this concept in practice is avoid following
the crowd.

- Uncle John always remarks that his results improved after he

moved to Nassau because he was forced to think far differently
than the rest of Wall Street. From that point on he was not
seeing the same company presentations and attending the same
events as all the other analysts on Wall Street.
- Uncle John believes his judgment sets him apart from other

- If you can keep your head when all about you are losing theirs,
you are well on your way to investing wisely.

- To buy when others are despondently selling and to sell when

others are avidly buying requires the greatest fortitude and pays
the greatest ultimate rewards.

Chapter 2: The First Trade In Maximum Pessimism

- “Bull markets are born on pessimism, grow on skepticism,

mature on optimism, and die on euphoria. The time of maximum
pessimism is the best time to buy, and the time of maximum
optimism is the best time to sell”

Method and guidelines

Templeton has distilled his principles of investment success into ten maxims,
which still act as the basis of his old firm's culture and share selection process:

1. Invest for real returnsThe true objective for any long-term investor is
maximum total real return after taxes.
3. Keep an open mindNever adopt permanently any type of asset or any
selection method. Try to stay flexible, open-minded and sceptical...
5. Why follow the crowd?If you buy the same securities as other people, you
will have the same results as other people... To buy when others are
despondently selling and to sell when others are greedily buying requires
the greatest fortitude and pays the greatest reward.
7. Everything changesBear markets have always been temporary. And so have
bull markets...
9. Consider avoiding the popular...Too many investors can spoil any share
selection method or any market timing formula.
11. Learn from your mistakesThis time is different are among the most costly
four words in market history.
13. Buy during times of market pessimism...The time of maximum pessimism
can be the best time to buy, and the time of maximum optimism can be
the best time to sell.
15. Hunt for value and bargains...In the stock market, the only way to get a
bargain is to buy considering what most investors are selling.
17. Search worldwide...If you search worldwide, you will find more bargains and
better bargains than by studying only one nation...
19. No-one knows everythingAn investor who has all the answers doesn't even
understand the questions.
Source: Templeton Maxims, published by Templeton Investment Management

The four key factors to consider in fundamental analysis of any company are:

1. The P/E ratio in relation to other comparable companies

2. Operating profit margins, particularly if they are rising
3. Liquidating value, i.e. the price the firm would fetch if sold off
4. The average growth rate of earnings, and especially the consistency of growth.
In general, avoid buying companies whose earnings slip two years in a
row. Also steer clear of those growing at an unsustainable pace.
When deciding which countries to invest in,

Avoid those plagued by socialist policies and/or inflation

Favour those with high long-term growth rates
Especially favour those showing a trend towards economic liberalisation, e.g.
privatisation, anti-union legislation, greater openness and transparency in
stock market dealings.
Key sayings

"History shows that time, not timing, is the key to investment success. Therefore,
the best time to buy stocks is when you have money."

"I never made money for clients by buying anything expensive."