John Templeton – perspective and judgement made him a rich investor

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As a first-year Yale student John Templeton became interested in investment and began to read books on the subject in addition to his normal studies. He eventually bought his first shares with some money he had made from working his way through college.

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He purchased seven dollars of preferred stock of Standard Gas and Electric Company which was selling at only 12% of par due to the Great Depression.

Most of his classmates came from wealthy families who owned a range of stocks, but Templeton observed a strange common phenomenon: they did not own any shares outside of one nation. To this 20-year-old student it seemed that you could find better value if you looked elsewhere.

He made up his mind to become an investment counsellor based on three reasons.

  • His earlier experiences had convinced him that his strongest talent was that of judgment. He felt he could weigh a variety of factors impacting a decision better than most people. He could assess the relative strengths and weaknesses of businesses and then show courage and self-confidence to act on the decision made.
  • He thought he could make more money in this field than in others.
  • He could help people acquire wealth and security – a noble calling, aligned with his Christian faith.

There was also a fall-back rationale: in training as an investment counsellor, he could learn about many different businesses, so if his path was blocked in investment counselling, he could apply that knowledge to another line of work.

Oxford’s distain for business

On winning a Rhodes Scholarship he was keen on studying a business-related subject. When he explained this to the Oxford professors the expression on their faces was of disgust. Templeton said that it was as if he had told them he wanted to study garbage.

They just could not understand why an Oxford ‘gentleman’ would be interested in studying business. He opted for law instead but kept hold of his investment career ambitions. Knowledge of the law was of some use in the investment counselling business, but more importantly, the size of the Rhodes Scholarship meant he did not have to work.

Travel broadens investment horizons

Instead, he travelled and cultivated friendships that were to prove valuable in later life.   He made several short trips to Europe on a shoestring budget, but his big exploration was made when, following graduation in 1936, he visited dozens of countries travelling through Europe and Asia to return to the USA.

For the eight months this would take he had a mere £100 in cash, refusing to take money from his brokerage account. He often told his friends that if you put aside money for capital, you should not start to spend it.

The travelling had a higher purpose. He wanted to understand, from the ground up, the way societies work in a wide variety of countries.  By examining the social, political, and economic systems from the grassroots he might gain some insights that would allow him to gain high returns for potential future clients and himself.

He went through 35 countries and at each place he tried to learn as much as he could that would give him greater understanding of companies around the world so that he could value them.

Principle: A curious mind is an essential tool for investors.

He was convinced that you can only figure the true value of a company by studying more than one nation because products from one company in a single country are in competition with other companies worldwide. So, to calculate earnings power in the future you need to know the competitive features of the whole industry across the globe.

Principle: Understanding business and political environments worldwide gives investors greater insight. Read, read, read.

A fortune made in 1939

When he eventually arrived in………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

 

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