Bargain hunter who foraged globally

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: There is much Indian equity investors can learn from John M. Templeton, in particular his belief in buying stocks at the point of maximum pessimism
One aspect common to all great investors is that their philosophy towards life and their approach to investment are completely in sync. Often their life’s experiences mould their investment approach. Legendary investor John M. Templeton, who passed away in July this year at the age of 95, exemplified this.

When he was growing up in Tennessee, US, in the Depression era, a lot of farms were foreclosed (because their owners were unable to repay their loans) and auctioned off. Whenever the auctions failed to find a bidder, Templeton’s father, a lawyer and investor, bought them for a song. Decades later, Templeton’s elder brother sold these properties to developers at considerable profit. From watching his father purchase these properties for a pittance was born Templeton’s investment philosophy of buying at the point of maximum pessimism.

As in the case of real estate, in the stock markets too there are times, such as now, when the macro-economic prospects appear so murky that investors are unwilling to touch even high-quality stocks. Such points of pessimism present opportunities to value investors. Templeton once said: “People are always asking me where the outlook is good, but that’s the wrong question. The right question is: where is the outlook most miserable?” According to Templeton, buying at the point of maximum pessimism allows investors to get their hands on stocks at bargain prices, and this leads to the best returns.
Today, when the stock markets are in the doldrums, Templeton’s teachings are especially relevant.

Pioneer of global investing
What also transformed Templeton into a great investor was his decision to hunt for value stocks worldwide. Intuitively, this makes sense: if you are a bargain hunter looking to buy stocks at depressed prices, why confine yourself to one market? A bull phase in your home market could last many years, making it impossible to find bargain stocks. Since, at a given point, different economies are at different stages of the economic cycle, a bargain hunter would have a wider basket to choose from if he invests globally. Investing in several economies also helps reduce country risk.