Old-Line Money Strategists Buying ‘Selectively’ : Big Commitments Premature, Managers Say
Two of Wall Street’s most astute and respected money managers, revered for their investment acumen, say they are still buying stocks selectively despite last week’s market crash. But it’s too early yet to make any major commitments, they add.
John Templeton, one of Wall Street’s most successful investment strategists, considers the latest stock market decline nothing more than a temporary glitch. He’s told the investors he represents to hang tight, and most are following his advice.
And Philip Fisher, another Wall Street sage, says there are some “steals” in the stock market and, even though he traditionally limits his investments to about half a dozen companies, he has slowly started to “nibble” at some.
Nevertheless, he is waiting to see if what happened last week on Wall Street is “an accurate forecast of a business decline or simply an internal (stock market) reaction resulting from the huge rise (in the market) since 1983 with no significant correction.”
Both men said they predicted some time ago that there would be a bear market and as a result they were not fully invested in stocks, although both had fairly high percentages of their portfolios in the market. Templeton said he had just 20% of his assets in non-stock investments such as Treasury bills. Fisher, who is 80, said he had between 65% and 68% of the funds he manages for his eight clients, totaling between $100 million and $150 million in stocks. Most of remainder is in cash or cash equivalents.
Few Shareholders Frightened
Both men admitted that they had suffered large “paper” losses but had not sold stock. Templeton said that in the one week the value of his mutual funds had declined by about 12%, or about $1 billion. Fisher’s portfolio shrank by about 20%, he said.
“Our shareholders have been through several bear markets without worrying,” the 74-year-old Templeton said in a telephone interview from his home in the Bahamas. “Our oldest mutual fund (Templeton Growth Fund) was started 33 years ago. One dollar put into that is worth $80 today if dividends were reinvested. Nevertheless, during that time we have had several bear markets, inflations, deflations, wars and every kind of problem you can imagine.”
Templeton, whose family of mutual funds has 600,000 shareholders, says that only about a tenth of 1%, or about $10 million of the total $8 billion invested with him, was redeemed this week. “Few shareholders were frightened enough to take their money out.”
Both men are long-term investors. They buy undervalued stocks. Templeton says he has put in orders to buy stocks of about 50 companies whose stocks have gone down about 50%. Fisher, especially, confines himself to about four core stocks. Excellent management is also essential.
“Such companies are not easy to find at prices that are not already discounted,” says Fisher, who lives in San Mateo. He has been in the securities business since 1928.
The Templeton funds are the most successful of any mutual funds over the long period.
Templeton, who has often said there is a surplus of cash in the world chasing too few stocks, is almost ready to buy more heavily into the current bear market. But not quite yet.
“We have about $1 billion cash on the sidelines,” he said. “But we have not felt that it was time yet to use our reserve money to buy more stocks. Monday the panic was so great that it will take people several weeks to recover their general common sense and their courage. We think there is no hurry to take advantage of the bargain prices.”
