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Thomas MacLeod
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I am an individual investor managing my retirement funds and investment funds of other high net worth individuals from Queenstown, New Zealand. I recently retired from a merchant bank in New York, where I ran a macro proprietary trading portfolio for 10 years. I achieved a compound 30% return... More
My company:
Glenorchy Capital
  • Where Would John Templeton Be Looking for Value Now? 1 comment
    Apr 13, 2010 3:32 AM

    It we had to identify our investment style with an investment great it would be John Templeton. While Soros and Buffett continue to steal the limelight and many try to model themselves on what they did or at least are currently doing, few realize that it is exceptionally difficult for the average investor with limited means to replicate what they did. However, few pay attention to the investment style or process of John Templeton. A process which, with diligence and perseverance, can be repeated by the average investor....provided of course they do not act like the average investor.

    Templeton's investing style can be summed up as looking for value investments, what he called "bargain hunting,"by searching out such targets in many countries instead of just one. Templeton's investing mantra was "search for companies around the world that offered low prices and an excellent long-term outlook."

    As a value-contrarian investor, Templeton believed that the best bargains were in stocks that were completely neglected - those that other investors were not even studying.
    Perhaps the two quotes emanating from Templeton which act as the basis for our investment process are:

    "Invest at the point of maximum pessimism." 

    "If you want to have a better performance than the crowd, you must do things differently from the crowd."

    Well enough with guiding philosophy, now down to business - where in the world would Templeton be looking for bargains? Well geographically where is the point of maximum pessimism? Well you certainly don't have to be anyone special to work that one out - we would say that it is the Greek stock market. With a median price to book ratio for the largest 100 stocks being a mere 0.65x it is a dead giveaway that stocks listed on the Athens stock exchange are the world stock market's unwanted children. Sure Greece has its problems but you cannot tell us that every Greek stock is toxic waste as the market would have us believe. Furthermore, with such cheap fundamental values one cannot tell us that the crisis isn't already priced into Greek stocks perhaps twice over!

    It seems that the whole Greek stock market is priced for bankruptcy. Granted there will be casualties but those stocks who have low gearing levels and generate considerable cashflows from exports are likely to not only survive but thrive in the years to come as Greece gradually gets it finances in order. Don't write the Greeks off, a crisis is a necessary ingredient for fundamental change.

    The FTSE/ASE 20 Index

    For the average investor identifying individual bargains may well be beyond reasonable expectations, but fear not. There is an ETF that trades on the Paris bourse which tracks the Athens Composite, its code is GRE. Buffet wasn't joking when he said that the average investor should put their money into an index fund i.e. they should forget about being stock pickers!

    Disclosure: Long Greek Equity Futures

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  • Jan Tabak
    , contributor
    Comments (36) | Send Message
    Excellent observation! GRE is near the 2009 lows. It is very unlikely to go below that level and a speedy recovery is very likely as soon as the uncertainty around Greece's bailout is resolved which will probably happen within weeks from now.


    In situations like this, it seems that uncertainty is even more harmful to performance of stocks than bad news.


    I'm long GRE now. After signs of bottoming I'll add to my position. I'd be surprised if the yield on this investment stays below 50% this year.


    This opportunity seems to be neglected completely by mainstream media attention. Thank you for an original and sound idea again!
    26 Apr 2010, 03:26 PM Reply Like
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