20 Stocks Primed for a Templeton? 7 comments
Mebane Faber
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From Investopedia:
"In 1939, with Hitler’s Germany ravaging Europe, John Templeton bought $100 of every stock trading below $1 on the New York and American stock exchanges. Templeton’s trade got him a junk pile of some 104 companies, 34 of which were bankrupt, for a total investment of roughly $10,400. Four years later he sold these stocks for more than $40,000!"
If you ran that screen today it returns about 300 stocks from a list of 2500.
If you then sort the stocks by number of insider buys it returns the following symbols:
Adcare Health (ADK)
Cano Petroleum (CFW)
Dreams Inc (DRJ)
Endeavour Intl (END)
Entercom Communications (ETM)
Frederick's of Hollywood (FOH)
Global Logistics (GLA)
General Moly (GMO)
GlobalSPACE (GSB)
Cytomedix (GTF)
Gray Television (GTN)
HOOPER HOLMES (HH)
Interstate Hotels & Resorts (IHR)
NTN Buzztime (NTN)
OMNOVA Solutions, (OMN)
Opko Health (OPK)
Castle Brands (ROX)
Roberts Realty Investors (RPI)
Tucows (TCX)
Xfone (XFN)
Some truly nauseating charts in there! Strong caution - a lot of these funds are teeny microcaps with little volume. . .values ranging from $150 million to $5 million.
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This article has 7 comments:
No kidding. Some (read: most) of them look truly toxic. There are a couple *potential* gems in there though.
However, I feel that this article lacks perspective. With minimum due diligence looking at the U.S. Bureau of Labor Statistics inflation calculator at data.bls.gov/cgi-bin/c... we find that:
"$1.00 in 1939 has the same buying power as $15.27 in 2009."
John Templeton's paltry $10,400 investment was the equivalent of $158,763.11 today. That is no small investment by any means.
Using a maximum share price of $15.27 ($1.00 in 1939) as a benchmark, my stock screener finds 7923 companies out of 8963. Obviously it is difficult to compare stocks apples to apples from 1939 to today due to inflation, number of stocks on the market, stock splits, etc, but simply looking at stocks <$1.00 is hardly a good screen IMO. Nor is sorting "the stocks by number of insider buys" a compelling way to weed out the bad of the bunch. The list of 20 stocks in the article look mostly like garbage and its a total crapshoot to invest in those 20 and expect big returns.
Looking at Micro, Small, and Mid caps valued at less than $5 with a 12 Month Trailing P/E Ratio less than 15, Debt/Capital ratio Below Industry Average, and a positive EPS Growth in the current fiscal year, we get 38 results with only 9 <= $1.00.
This may not be a terribly fantastic screener, but it should at least leave out some of the garbage from the original 20 stock list and is slightly more realistic in accounting for inflation than the original, given that $1.00 in 1939 is hardly equivalent to $1.00 today.
I'm sure if Templeton had access to the tools available today he would have made a much more educated evaluation of the companies he invested in, and probably would have avoided investing 34% of his money in bankrupt companies.