The audio and visual quality of this video is a bit punishing to work through, but the common sense wisdom that you’ll pick up from these two titans will be worth, I’d think.
In the coming two to three months, I’m going to focus on adding some content to the site that focuses on investing wisdom we can pick up courtesy of Peter Lynch and John Templeton. Their legacies aren’t quite as big as the Buffett and Grahams of the investing world, but I think it’s dumb to assume that the richest investors in the world are necessarily the best investors in the world.
That may seem somewhat counterintuitive of me to say, given that having more money is literally the scorecard that determines how well an investment did, but I think you have to take external factors into account. For instance, Warren Buffett owned operating companies as his primary way of building wealth. He has money coming in all the time from See’s Candies and GEICO that he can use to make his legendary investments in Wells Fargo, American Express, and Coca-Cola.
That’s not the game that Lynch and Templeton played. For instance, Lynch decided to retire at age 46. Investing is obviously a huge part of his identity, but it is not as central to his identity as it is to say, Warren Buffett. There are a lot of perks to being a private investor that don’t exist when you are in the public eye.
As Lynch says in the interview above, a lot of the money made by the stocks that he owns came in the fourth, fifth, or sixth year, rather than the fourth, fifth, or six month that he owned it. As Templeton added, when you buy a deeply undervalued stock, it doesn’t automatically go up just because you became the owner. When you are a private investor, you can have the patience to wait out 5-10 year periods without having to deal with external pressure from investors that want to see the stock price go up right now, thank you. During the crash of ’87, Lynch had to take a break from his Ireland vacation to sell British stocks to meet the redemptions in his Magellan Fund. Once you are rich, and good at what you are doing, you may not want to deal with those pedestrian concerns. By managing his own money, Lynch doesn’t have to deal with “investor freakouts” everytime the stock market hiccups.
You can’t say he is worse off than Buffett simply because he chose to take his hundreds of millions of dollars and convert them into a lifestyle that suits his temperament, compared to Buffett who chose “to stay in the game” these past 40 years. If Lynch were still running the Magellan Fund, he’d probably have to go the Sequoia Fund route and close off additional contributions at some point (it’s hard to make money when you’re running a $100 billion fund). But if Lynch ran Magellan from 1977 to 2014, I have no idea whether his record with common stocks would be any better or worse than Buffett’s. Lynch achieved 29% returns from 1977 through 1990; how can you could that guy a worse investor than Warren Buffett? It’s one of those questions that belongs in the “I don’t know category.”
And John Templeton is possibly the most insightful, courageous investor of the past century. He bought a round lot of every stock on the American exchange trading for less than a dollar during The Great Depression (how’s that for guts!) and he pioneered the notion of international investing, making a lot of money in Japan at a time when he thought most American heavy stocks were overvalued. Templeton’s sensibilities are something that can be co-opted by blue-chip investors; for instance, following Templeton’s spirit, you could look for companies that are headquartered in the United States yet are growing internationally at a rapid clip (think of a company like 3M, which I don’t mention around here as often as I should).
Templeton didn’t end up as rich as Buffett (though his wealth crossed into the billions) because he was quite generous with charitable giving throughout his lifetime. It’s neither better nor worse than the Buffett approach of giving it all away at the end (“absolute good” worldviews are just as legitimate as “most good now” worldviews, imho), but it has drastically different effects on the amount of wealth that you end up with throughout your life. Look for more posts on these two gentleman appearing on this site within the next 90 days.
Originally posted 2014-01-08 17:00:49.