Here is the second part of my interview with Lauren Templeton, founder of Lauren Templeton Capital Management LLC andniece to legendary investor Sir John Templeton.Iasked Ms. Templeton how her uncle was able to tell if a beaten-up stock was abargain or a value trap. She said:
Yes, although he became known for purchasing distressed securities as he did in 1939 prior to World War II, or even Ford in the late 1970s-early 1980s, he often side-stepped poor balance sheets unless there was an unusually large reward versus the risk. In other words, unless the situation was unusually attractive, or he understood it well and felt comfortable that the firm would continue he often recommended avoiding financially distressed firms.
I also asked her what made her uncle so capable as an individual and investor (scholarships to Yale University, Rhodes Scholar, Money Magazinesstockpicker of the 20th century, etc.). She answered:
I would actually rank his self-discipline as one of his strongest character traits. Because his parents never instructed him or told him what to do, he was forced to think on his own at an early age and rely on himself for decision making. As we know, independent thinking is the critical hallmark of a contrarian investor.
Because of this conditioning as a child he was well prepared to think on his feet when he faced a difficult problem. For instance when his father could no longer afford to send him to Yale, he obtained merit based scholarships, worked three jobs and played poker to put himself through the rest of college. He said that because he had to work so hard during this time it focused him on making his best grades in order to obtain scholarships, and in turn these outstanding grades propelled him into becoming a Rhodes Scholar.
In sum, the lesson he learned was that when something appeared to be a tragedy in the near-term it could actually be a blessing in disguise. He said he would have never worked so hard, become a Rhodes Scholar, etc. had his father paid for him to finish school. He then took this same perspective into investing and learned to identify incidents in the market that looked liked crises, but actually created to new opportunities.
The final, and third, part of the Lauren Templeton interview to follow shortly.
Blogs & Comment
Maximum pessimism (II)
By Larry MacDonald
Here is the second part of my interview with Lauren Templeton, founder of Lauren Templeton Capital Management LLC andniece to legendary investor Sir John Templeton.Iasked Ms. Templeton how her uncle was able to tell if a beaten-up stock was abargain or a value trap. She said:
Yes, although he became known for purchasing distressed securities as he did in 1939 prior to World War II, or even Ford in the late 1970s-early 1980s, he often side-stepped poor balance sheets unless there was an unusually large reward versus the risk. In other words, unless the situation was unusually attractive, or he understood it well and felt comfortable that the firm would continue he often recommended avoiding financially distressed firms.
I also asked her what made her uncle so capable as an individual and investor (scholarships to Yale University, Rhodes Scholar, Money Magazinesstockpicker of the 20th century, etc.). She answered:
I would actually rank his self-discipline as one of his strongest character traits. Because his parents never instructed him or told him what to do, he was forced to think on his own at an early age and rely on himself for decision making. As we know, independent thinking is the critical hallmark of a contrarian investor.
Because of this conditioning as a child he was well prepared to think on his feet when he faced a difficult problem. For instance when his father could no longer afford to send him to Yale, he obtained merit based scholarships, worked three jobs and played poker to put himself through the rest of college. He said that because he had to work so hard during this time it focused him on making his best grades in order to obtain scholarships, and in turn these outstanding grades propelled him into becoming a Rhodes Scholar.
In sum, the lesson he learned was that when something appeared to be a tragedy in the near-term it could actually be a blessing in disguise. He said he would have never worked so hard, become a Rhodes Scholar, etc. had his father paid for him to finish school. He then took this same perspective into investing and learned to identify incidents in the market that looked liked crises, but actually created to new opportunities.
The final, and third, part of the Lauren Templeton interview to follow shortly.