Former Franklin Templeton CEO Says Stick to your Discipline

Over a more than 46-year investment career, former Franklin Templeton portfolio manager Don Reed has learned patience, says a recent Morningstar article.

In an interview on January 31st (the formal date of his retirement), Reed offers investors the following insights:

  • Sticking to your guns can be tough: During the tech bull market of the late 1990s, Reed recalls, Templeton owned no tech stocks because the companies didn’t meet the firm’s valuation criteria.
  • With some stocks, patient and long-term investing go hand in hand: Reed says, “The turnover in the Templeton International Stock fund last year was 16%. We didn’t have stocks that we wanted to sell in order to buy others that we thought could do better.”
  • An otherwise excellent company may not represent good value: Reed uses the example of Quaker Oats Co.–before it was acquired by Pepsico, he was asked why it wasn’t in his portfolio. He said that, while everyone knew what a great company it was, it was “overvalued. Too expensive.”
  • Research is essential: Reed says it’s important to talk to the companies considered for inclusion in a portfolio as well as the clients of those companies.
  • Investing globally reduces your risks: Reed mentions that Canada, for example, has “world-beating companies in some sectors, such as financial services.”
  • If you lose once, don’t lose twice: Reed says that 2008 “kind of destroyed the confidence of a lot of investors.” But selling out during a decline, he says, ensures that you lose upside opportunity. Instead, use it as a chance to “average (purchases) into mutual funds.”