Templeton's Light Shines Through Volatility

In the volatile markets we have experienced in the recent past I find one of the maxims of the legendary investor Sir John Templeton very relevant "I never ask which way the market is going, because I don't know........ I search for stocks. Forty years of experience have taught me you can make money without ever knowing which way the market is going."

This approach is echoed at PPM and has worked well over my 25 year career in financial markets. Simply because nobody consistently gets the short term market direction right. What Templeton is expressing is an investment philosophy that ignores the unpredictable sentiment driven short term market fluctuations in favour of a longer term approach driven by investment fundamentals, which can be understood.

Like Templeton, PPM is a long term investor and we share his philosophy of investing in companies that will make excellent returns over a long period.

Of course market speculators, chartists, behavioural economists, and all manner of other punters will persist, romanced by the excitement of the market and the prospect of short term returns – some will succeed over short periods, but history has demonstrated time and time again that their glory is short lived.

If you think predicting the market is difficult try predicting the direction and magnitude of economic activity. The history of economic prediction is equally bad (if not worse) and thus provides no guide to action for investors.

There are so many commentators, analysts and media personalities giving views about what might or might not happen that nearly everybody is forced to have a view no matter how loosely held. This is merely a distraction from the important task of identifying companies that will deliver excellent long term returns.

Regardless of the economic or market gyrations, good companies will prosper – our focus is finding them.

Hugh MacNally, September 2011