Why the Templeton Method Works
John Templeton was always at pains to emphasize that no one single metric would enable investors to pick winning stocks. His team of analysts, he once told two biographers researching a book on his methods, looked at more than 100 different yardsticks of value when his team was “hunting for bargains” around the world. Earnings, balance sheets, and cash flow were all among the many indicators that his analysts studied. “We think it would be a mistake to adopt any one method,” he went on. “We want our analysts to adopt whatever approaches are appropriate to a particular situation. I cannot be really specific about this. Besides, any method that is particularly successful only works if we keep it to ourselves. So we wouldn’t tell people about methods that worked particularly well.”1
At the same time, he was adamant that the successful investor should not be tied to one single approach. “The key to long-term success is to keep an open mind,” he told the same authors. “And by that I mean the willingness to adapt any approach, any technique suitable for the investment. And to explore any type of investment in any place in the world.”2
This was not just a matter of words. He himself gave money from time to time to a number of professional investment managers who followed a range of quite different approaches than his own, merely to test how well they might do. To take just one example, in the 1990s he gave £10 million of his own money, in two ...