John Marks Templeton

John Marks Templeton

Sir John Marks Templeton founded the Contrarian strategy and, before his death in 2008, was called the greatest stockpicker of the century by Money magazine. He was one of the first investors to take investing overseas and sought out great value stocks in other countries, particularly emerging markets. A self-confessed bargain hunter, Templeton lived in the Bahamas away from the noise of Wall Street, but where successful business people vacationed. He was a man who understood the value of his industry contacts and what it meant to get information directly from the horse’s mouth.

Summary

Templeton’s Contrarian strategy is very similar to value investing and seeks to find stocks that are trading at low multiples of price when compared with book value, Cash Flow, earnings, Dividends and sales. As with value investing, the idea is that the market will eventually correctly value the stocks and they will increase. Templeton also showed that great value can be found in emerging markets.

Success Formula Contrarian Bargain Hunting

  1. MktCapM is >= US$ 300 million (basis year 2000) adjusted yearly
  2. Current P/E is < average P/E for last 5y
  3. Average P/E for each of the last 5 FY is < than 75
  4. EPS growth % for last 12 months is > 0
  5. EPS growth % for last 5y is > 0
  6. EPS for last 12 months is >= to EPS for last FY
  7. EPS increased over each of the last 5 FY
  8. Op Mgn % for last 12 months is > 0
  9. Op Mgn % for latest FY is > 0
  10. Op Mgn % for last 12 months is >= industry’s median
  11. Op Mgn % for latest FY is >= industry’s median
  12. Debt to assets ratio for latest FQ is < industry’s median

Hypothetical performance back-tested

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical monthly relative performance

How to read this graph:
A green bar shows how much the guru strategy outperformed the benchmark index in a particular month. A red bar shows how much the guru strategy underperformed the benchmark index in a particular month.

Data source: Bloomberg, Calculations: meetinvest

Disclaimer

Hypothetical performance is not necessarily indicative of future results. No representation is being made that any action will achieve profits or losses similar to those displayed. The result may be overstated as neither transaction costs nor bid/ask spreads nor slippage have been considered. Output equally weighted with maximum 5% allocation per position and rebalanced monthly. Holdings are systematically replaced when the screening criteria are not met anymore. No additional buying or selling rules (technical analysis) have been employed.

Historical portfolio turnover

Data source: Bloomberg, Calculations: meetinvest

Books

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