Bought every stock priced at $1 or less with borrowed money
Several sources agree that he borrowed about $10,000 and bought 100 shares each of 104 companies on the New York market after World War II broke out in Europe
Famous Traders · Value
Sir John Templeton
John Templeton / The Global Bargain Hunter Who Bought When Fear Was Greatest
In 1939, as the world war began, a young man from Tennessee borrowed money to buy a whole basket of stocks priced under $1. Fifteen years later he launched a fund investing worldwide, in an era when Americans barely looked at foreign stocks. On this page you can buy the 1939 basket, measure which market is truly cheap, and see where market mood stands in the cycle right now.
ORDER · SEPT 1939Buy 100 shares eachFILLED
- Market
- NYSE · price no more than $1
- Quantity
- 104 companies
- Capital
- Borrowed about $10,000
About 4 years later≈ $40,000
Illustration: a mock order slip. The individual results in the grid come from a model adjusted to match the reported totals, not real company data. No openly licensed photo was found
Born1912
Templeton Growth1954
Return per year≈14.5%
The 1939 basket104 stocks
Templeton Growth · 1954–1992≈14.5%Average annual return with dividends reinvested. Some sources use a figure above 15%
$10,000≈$2MInvested at the fund’s launch in 1954 and held until 1992
The 1939 basket×4About $10,000 grew to about $40,000 in about 4 years
01
ProfileQuick facts
NameSir John Marks Templeton
Born29 November 1912 in Winchester, Tennessee, USA
Died8 July 2008 in Nassau, Bahamas, aged 95
EducationBachelor’s degree in economics from Yale in 1934, and a Rhodes Scholarship to study law at Balliol College, Oxford
The fund that made his nameFounded the Templeton Growth Fund in 1954, averaging about 14–15% a year up to 1992
StyleContrarian value investing, hunting for bargains worldwide, buying at maximum pessimism and diversifying
CitizenshipGave up US citizenship in 1964, held British citizenship, and lived full-time in the Bahamas from 1968
HonoursKnighted in 1987. Founded the Templeton Prize in 1972 and the John Templeton Foundation in 1987
02
From Tennessee to NassauFrom a small town in Tennessee to a fund manager investing across the world
Templeton grew up in a small town in Tennessee, graduated from Yale during the Great Depression and won a scholarship to Oxford. As a young man he saw that share prices during times of fear were often far below their true value
From the 104-stock deal of 1939 to the globally invested Templeton Growth fund, then a move to the Bahamas and the sale of his business to Franklin in 1992. Tap each stage to follow his journey
LOGBOOK · 1912–2008Templeton’s travel log
1912 · Born on 29 November 1912 in Winchester, a small town in Tennessee, USA
1 / 14
16 RULES · 8 selectedThe investing rules he wrote
- 2Invest; don’t trade or speculate
- 4Buy low
- 6Buy value, not market trends or the economic outlook
- 7Diversify
- 10Don’t panic
- 11Learn from your mistakes
- 14An investor who has all the answers doesn’t even understand all the questions
- 16Don’t be fearful or negative too often
Summarised from Sir John Templeton’s 16 rules for investment success. The numbers are the order in the original. His rule 12 was to begin with a prayer, reflecting how he saw investing as a matter of humility
Templeton’s rule 16Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria
Paraphrased, not a direct quote
03
The 1939 basketLab: buy the whole basket, 1939 style
Templeton didn’t know which companies would survive, so he bought them all. The grid below is a model of 104 stocks, adjusted so the total is close to what was reported: about 4 times the money, with 4 stocks going to zero. Choose how many stocks to buy, then re-pick several times to see how much the results swing
Your $10,000—
After repaying the $10,000 loan—
Chance of loss—
Middle 80% of results—
A model for learning. Individual results are drawn from a log-normal distribution, then adjusted so the average is about 3.9 times with 4 stocks at zero, matching the totals reported by several sources. Not real prices per company. The chance of loss and the range of results are calculated from 2,000 random picks. Loan interest, brokerage and taxes are excluded
What this means for traders
When you’re confident prices are cheap overall but don’t know which will keep going, diversifying brings your results closer to the average. Traders who put everything into a few orders can be right about the big picture and still lose by picking the wrong ones
COST · COMPOUNDING
Small costs on every trade add up to a lump sum Trade gold, currencies or indices with XM through 1TRADER and get up to 90% of the IB commission on every lot
Open account ↗1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates
04
Bargains around the worldLab: is this price truly cheap, looking 5 years ahead?
Templeton didn’t just look at today’s P/E. He asked what the price paid today would be relative to the earnings expected in 5 years. LGT reports that he usually avoided stocks where this was above about 12–14 times. Pick a sample market or adjust the numbers yourself
Price to earnings in 5 years—
Earnings yield in 5 years—
Earnings growth—
Against the 12–14× criteria—
Japan’s P/E of about 4 times against about 19.5 times in the US is a figure Morningstar cited when describing his investments in Japan. Japan’s P/E of about 60 times in 1989 is a commonly cited approximate figure. All growth rates are assumptions for demonstration. The formula is today’s P/E ÷ (1 + growth rate) to the power of 5
What this means for traders
A bargain that never grows may not really be cheap, and an expensive asset that grows fast may not be as expensive as it looks. Currency traders can ask a similar question: how much of the expected path of interest rates over the next year is already reflected in today’s rate differential and price?
SPREAD · COSTDon’t let costs quietly eat your profitsTrade with XM through 1TRADER and get up to 90% of the IB commission on every lot
1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates
05
Maximum pessimismLab: where is the market in the cycle right now?
Templeton summed up the market cycle in 4 phases, from pessimism to euphoria. Move the point along the wave, or tap a real event from his life, to see what the crowd was saying and what he did in that phase
The crowd says
—
What Templeton did
—
—
—
The wave represents an idea, not a real price chart. The positions of the events on the wave are our interpretation, based on accounts by Morningstar and Investing the Templeton Way. Knowing where you are is hard in real time, so he focused on measuring price against value rather than guessing mood alone
What this means for traders
When everyone is afraid, spreads widen, prices swing hard and bad news is loudest, which is also when traders most easily make mistakes. If you want to go against the market, cut your order size and set your stop loss first, because what looks cheap can always get cheaper
06
The 2000 lock-up shortLab: shorting the dot-com bubble, Templeton style
After an IPO, executives and employees are usually barred from selling their shares for a period, called a lock-up. According to Investing the Templeton Way, he picked stocks that had risen more than 3 times from their IPO price and shorted them about 11 days before the lock-up expired, expecting insiders to sell. Check hypothetical companies against these criteria
- Price up more than 3× from IPO—
- Within about 11 days of lock-up expiry—
- Tradable shares will increase a lot—
Shares tradable on the market
Before unlockAfter unlock
Number of stocks shortedAbout 84
Per stockAbout $2.2M
TotalAbout $185M
Reported profitOver $90M
The 2000 short figures come from his grandniece’s book and articles citing it; other sources use 80 or 88 stocks. The companies in the lab are hypothetical. Shorting carries the risk of unlimited loss if the price keeps rising. These criteria are only what he reportedly used, not a system that guarantees results
What this means for traders
Prices are driven not only by value but by who must buy and who must sell, and when. Lock-up expiries, option expiries and the dates funds must rebalance all create buying and selling pressure that can be anticipated, and should be part of your trading plan
07
Fact checkFact check: truth and stories passed along
Templeton’s story has been retold many times, so the figures don’t match in several places. We sort each one by the weight of the evidence
The basket included 34 bankrupt companies
The figure varies by source. Morningstar and Advisor.ca use 34, while Wikipedia uses 37. What they agree on is that about a third of the companies were bankrupt
Only 4 went to zero, and the money roughly quadrupled
Several sources report that about 4 years later he sold for about $40,000, and that only 4 stocks were worthless. The figure comes from what he and his biographers have said; no full trading record has been published
$10,000 in the Templeton Growth Fund grew to about $2 million
Invested at the fund’s launch in 1954 with dividends reinvested, it would have been about $2 million in 1992, or about 14.5% a year. Some sources use a figure above 15%, depending on the period counted
Sold his business to Franklin for $440 million
Franklin’s company history puts the total deal value at about $913 million. The $440 million figure used in some news reports may refer to his share or be counted differently, so no single figure should be quoted
Gave up US citizenship to avoid taxes
He gave up citizenship in 1964 and moved to the Bahamas, which has no income tax. But he himself said living far from Wall Street helped him make independent decisions, and reports say his performance improved after the move. Both reasons may be true at once
Templeton shorted the whole Nasdaq index
He shorted individual stocks that had recently IPO’d and risen sharply, not the whole index. According to Investing the Templeton Way, it was about 84 stocks at about $2.2 million each, for a profit of over $90 million. Some sources use 80 or 88 stocks
The phrase This time is different comes from him
His 16 investing rules include the line that people who say this time is different, when it’s really a repeat of the past, have spoken the four most expensive words in investment history. The quote that gets passed around may be shorter than the original
The Templeton Prize was meant to be worth more than the Nobel Prize
The prize’s website says the award has always been set higher than the Nobel Prize, because he believed spiritual progress mattered no less than any other kind
Every lot you trade with XM through 1TRADER earns cash back of up to 90% of the IB commission, lowering your costs over time
Open an account for cash back ↗1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates
08
LessonsLessons for Forex and gold traders
Your checklist
0/4
Decide by the numbers, not the news
Templeton bought when the news was worst, because the numbers said prices were cheap, not because the news was good. Traders can use the same principle: check how much of the news is already in the price before deciding on feelings
Diversify when you don’t know which will survive
In 1939 he didn’t pick a few stocks; he bought the whole basket, knowing some would fail. Diversification keeps a mistake on any one position from destroying the whole portfolio
Beware of “this time is different”
Every bubble has a new reason that sounds good. When you hear that the old rules no longer apply, ask whether the fundamentals have really changed or prices have just risen so far that people need a reason to justify them
He said don’t trade, invest
His rule 2 was to invest, not trade or speculate. Traders don’t have to stop trading, but should know that frequent entries and exits have a cost, and every order needs a clear reason, not just a wish to be in the market
09
Quiz5-question quiz
Question 1 / 5
What kind of stocks did Templeton buy in 1939?
100 shares each, 104 companies in all, with about $10,000 of borrowed money
According to his 16 rules, in which phase are bull markets born?
Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria
In which year was the Templeton Growth Fund founded?
It was founded in 1954 and registered in Canada
In 2000, what timing did Templeton use to short tech stocks?
He picked stocks that had risen sharply after their IPO and shorted them before insiders could sell
Which four words did Templeton warn were the most expensive in investing?
This time is different, when people believe the old rules no longer apply even though history is repeating itself
0/5
10
Buy at maximum pessimismBuy when people are afraid, but survive until they come back
What you can apply from Templeton is separating emotion from price, measuring value with numbers, and sizing orders so you survive while the market still disagrees with you. Here are tools on 1TRADER that can help
REBATE · 1TRADER
Trade like a pro: control your costs
Open an account through 1TRADER and get cash back on every lot you trade, lowering your spread and commission costs over time.
How to get rebates, step by step →Leveraged trading carries high risk. Study the broker’s terms and the risk disclosure before opening an account.
11
Further readingFurther reading
- Investing the Templeton WayLauren C. Templeton and Scott Phillips · 2008Written by his grandniece, covering buying at maximum pessimism, from the 1939 deal and his investments in Japan to shorting dot-com stocks in 2000
- The Templeton PlanJohn Marks Templeton · 1992His own book on principles for life and success, reflecting how he saw investing as part of a philosophy of life
Sources for this article
- Wikipedia: John Templeton
- Morningstar: John Templeton, how to be a bargain hunter
- Advisor.ca: Sir John Templeton passes away
- LGT: How John Templeton reconciled God and Mammon
- Templeton Prize: About Sir John Templeton
- ValueWalk: Sir John Templeton gospel
- Livewire: Sir John Templeton’s 16 rules for investment success
- ShareScope: The two best trades of the 20th century?
- Redwheel: Canary in the coal mine
- Company Histories: Franklin Resources
12
FAQFrequently asked questions
Who is John Templeton?
An investor and fund manager born in the US in 1912 who founded the Templeton Growth Fund in 1954, pioneered global stock investing, and was known for buying against the crowd when markets panicked. He died in 2008
What does maximum pessimism mean?
The point where people are most pessimistic. Templeton believed it was the best time to buy, because prices are often far below value, and that the time of maximum optimism is the best time to sell
What was the 1939 deal for 104 stocks?
He borrowed about $10,000 and bought 100 shares each of every company on the New York market priced at $1 or less, 104 companies in all. About 4 years later he had about $40,000, and reportedly only 4 stocks went to zero
What returns did the Templeton Growth Fund make?
From 1954 to 1992 it averaged about 14.5% a year with dividends reinvested, turning $10,000 into about $2 million. Some sources use slightly different figures depending on the period counted
How can Forex and gold traders use Templeton’s ideas?
Don’t follow crowd emotion, measure whether prices are cheap or expensive with numbers, beware of “this time is different” reasoning, and size orders so a single mistake doesn’t destroy your account
Educational content, not investment advice. Return figures are publicly reported figures. The labs use models and hypothetical companies. · risk disclosure · Forex glossary