Investment Principles of Warren Buffett, John Templeton, and Robert Wilson (1985)
I’m a huge fan of the Investors Archive YouTube channel (no affiliation to IBB) as they regularly posts interviews from the “masters” of investing, business, economics, and finance. They recently posted an interesting 1985 flashback episode from the PBS economics and investing television series Adam Smith’s Money World highlighting 3 world-renowned money managers, Warren Buffet, John Templeton, and Robert Wilson. The host sits down with each manager to discuss their unique investment principles and characteristics that have distinguished themselves from their peers int heir ability to consistently beat the market. There are several key take-away points from each manager that really stuck out to me.
https://www.youtube.com/watch?v=_eLRAhjOwyg
John Templeton: Independent Tinker based in The Bahamas
Leveraged $10K to purchase 100 shares of each NYSE listed company valued at less than or equal to $1 (~$17 in 2017) circa 1939 based on the investment thesis that Germany’s invasion of Poland would put the US on a war footing and subsequently lift the US economy out of depression of the 1930’s.
Widely known for “avoiding the herd” and “buy when there’s blood in the streets” investment philosophy. Essentially believes to go against the grain and do the opposite of the general consensus by buying when other are despondently selling and selling when other are avidly buying will provide the greatest returns over time.
Lived year-round on the Bahamas because he found that it was just a pleasant place to live and was effectively able to avoid being influenced by all the noise on Wall Street, which he claims led to better fund performance. “It’s much easier to be odd when you’re a thousand miles away” – John Templeton.
Geographically agnostic “world-wide bargain hunter” that once had over 1/2 of his portfolio exposure in Japan where he found quality companies selling for 2-3X annual earnings.
Devout Christian that prayed on every investment decision which he believed resulted in fewer mistakes overall.
Predicted in 1982 the Dow would reach 3,000 by the 1988 US presidential election with 50% certainty. However, the Dow did not break the 3,000 mark until April 1991 following the end of the first Gulf War.
Believes healthily M&A or “takeover activity” and insider buying is a strong indicator of an undervalued market.
Warren Buffett: Independent Thinker based in Omaha
Investment philosophy derived from Ben Graham, widely known as the “father of value investing” and author of Security Analysis during his tenure at Columbia Business School.
Gained a net worth of $500M (~$1.46B in 2017) in 1985 at the age of 55.
Always maintaining a simple investment style. “The first rule in investment is don’t loose. The second rule in investment is don’t forget the first rule” – Warren Buffet.
Temperament is more important than intellect for investment success.
Having a stable, level-headed personality and thinking independently without seeking consensus from other is a key personality trait for successful investors.
Good investments (businesses) do not need to be monitored everyday, the stock of a price does not provide any tangible information about the quality of a business.
Operates Berkshire from Omaha to avoid being influenced by Wall Street. There’s an “over stimulation” problem in New York.
Only invest in your “circle of competence”. Invest in what you know. You don’t have to make money in every game.
Be willing to wait for a prolonged time (even ~2 years) to find the right opportunities. There are no called strikes in the investment business. Be patient and don’t invests out of boredom.
Treat buying stocks like you would treat buying a brick and mortar business. Don’t be concerned with immaterial short-term price volatility when deploying capital.
Robert Wilson: Derivative Thinker based in New York City
Only interested high-risk, speculative investment opportunities. Go big or go home investment philosophy.
Long stocks with positive earning growth, short stocks with negative earnings growth.
Enjoys living in New York an believes there is an edge to be gained by being close to Wall Street by feeding off the ideas of others (brokers). “I’m a derivative thinker” – Robert Wilson.
Limited downside risk = limited upside risk. Don’t pick investments that are too stable if you want to earn any alpha.
The only way to make money in the market is when the market’s perception of a stock changes. There has no be an improved perception of a company.
Money, in the abstract, is the most importing thing in the world.
Summary
I think all three investors profiled in the video have their own qualities and characteristics that make then unique and attribute to their success in the markets. I agree with the host in stating that Templeton and Buffett have similar investment philosophies in the fact that they are independent thinkers and trust their own perception. They both choose to reside in isolated location in part to avoid the influence of others. They both believe in having a tightly controlled flow of information.
Wilson has an investment strategy that’s dependent on the information flow of his brokers, so he’s different in that regard. He also is not shy to short a stock where earnings are suffering. Quarterly earnings seemed to be the primary driver behind his logic and he was the least risk-averse out of the three. Buffett seems to be the one who truly only invest in businesses within his “circle of competence” that he understands intimately with a geographical preference for the US markets, whereas Templeton employed a global, macro-strategy where capital was allocated wherever there is undervalued securities were to be found.
I like Buffett’s pure logic and rationale. I like Templeton’s open-minded and global approach. I like Wilson’s high risk-tolerance. Which investment philosophy do you identify with the most?