In the world of investing, there are few names as revered as Sir John Templeton. A pioneer of global investing and the founder of the Templeton Growth Fund, Templeton’s investment philosophy has stood the test of time, consistently delivering value to investors. His approach to investing, which emphasizes value and contrarian thinking, resonates strongly with our philosophy here at Hoover Capital Management.
One of Templeton’s most famous quotes encapsulates his approach to investing:
“The ordinary investor will hear that X corporation has a good outlook, and he rushes in to buy the stock. Nine chances out of ten, that’s a mistake because if obviously it has a good outlook, the price already reflects that. And then if there should be any change in its outlook, the price will go down. So he’s basing his investment selection on something that is misleading him nine times out of ten. So you have to buy those things that other people are selling. Otherwise, you will never get a bargain. Don’t ask yourself, does this company have a good outlook? Ask yourself, how cheap is it? How unpopular is it? If you find that you’ve found a stock that investors say, oh that’s terrible, I wouldn’t buy that. That’s the one to buy.”
This quote underscores the essence of value investing – the pursuit of stocks that are undervalued by the market. This philosophy is at the heart of our approach at Hoover Capital Management. But how do we apply this philosophy in today’s complex and fast-paced market environment? Let’s break it down.
1. Look Beyond the Obvious
Just like Templeton, we at Hoover Capital Management caution against the herd mentality. Just because a company has a good outlook doesn’t mean it’s a good investment. The market has likely already priced in this positive outlook. The key is to look beyond the obvious, to find value where others may not see it.
2. Embrace Unpopularity
Templeton advises investors to buy what others are selling. This contrarian approach, which is a cornerstone of our investment strategy at Hoover Capital, can be challenging, as it often means going against prevailing market sentiment. However, it is in these unpopular stocks that one can often find the greatest bargains.
3. Focus on Value, Not Outlook
Rather than asking if a company has a good outlook, Templeton suggests asking how cheap and unpopular it is. This shift in perspective, which is integral to our approach at Hoover Capital, can help investors identify undervalued stocks that have the potential for significant price appreciation when the market corrects its undervaluation.
4. Don’t Shy Away from ‘Terrible’ Stocks
Finally, Templeton suggests that the stocks that investors are most averse to may be the ones worth buying. This doesn’t mean buying into companies with poor fundamentals or unsustainable business models. Instead, it means identifying companies that are temporarily out of favor but have strong underlying value. This is a principle we adhere to at Hoover Capital, as we seek to uncover value where others may not see it.
In conclusion, Templeton’s investment philosophy encourages a contrarian, value-focused approach. It’s about finding hidden gems in the rough, those stocks that are overlooked or shunned by the majority of investors but hold significant potential for value appreciation. At Hoover Capital Management, we resonate with this philosophy and strive to apply these timeless principles in our investment strategy. As we navigate the complexities of today’s global markets, the wisdom of Sir John Templeton serves as a guiding light, reminding us of the timeless principles of value investing.