Pondering Sir John's Approach at Templeton Growth Fund AGM

For reasons previously mentioned and linked to, the heyday of the Templeton Growth Fund is long gone. But the fund's annual meeting was held in Toronto last week, which is the subject (along with that of the Templeton approach) of Jonathan Chevreau's Financial Post column today. Here's an interesting bit:

Market cycles require time to work themselves out. The average holding period for retail investors has fallen under a year to as little as six months -- quite a contrast to the five-year Templeton time horizon. In the question-and-answer session, one advisor said Sir John also used a 10-year horizon. Franklin Templeton president Don Reed replied that Sir John had personally given his blessings to the five-year perspective. Price/earnings ratios are at 20-year lows, Myers says. Hot markets such as Brazil, China and Canada are expensive in comparison to better-valued markets in Europe, Japan and the United States.

And another:

The four sectors with attractive price/earnings ratios relative to the MSCI world index are media, pharmaceuticals, information technology and telecommunications. No surprise, then, that the fund's top 10 holdings include such stocks as General Electric, Merck & Co., Glaxo-SmithKline PLC, Microsoft, Oracle, ING Group NV or Vivendi. But Myers is "still standing on the sidelines" for U. S. financial stocks, "ready to pounce" once the firm's analysts decide the time is right.

Chevreau correctly points out that even with the "Growth" in the name, the Templeton Growth Fund is a value fund. But it's not and never has been a deep value fund -- such as the Cundill funds are.

John Templeton always paid much more attention to price-earnings ratios. In fact, I've read interviews with him where he said P/E was the most important thing to him. This can be contrasted by folks like Tim McElvaine, mentioned recently here. I read an address he gave to some investors once where he called what he did as (and I'm working from memory here) "buying on the assets and selling on the earnings."

Truthfully, the McElvaine-style deep-value approach appeals to me. Primarily because I'm not all that smart. And the idea of buying cheap assets and then just waiting seems so doable.  Buy and just add patience and you've got the recipe for profitable investments. Maybe the cheap assets will rise as investors see the value. Maybe the company gets taken private. Or taken over. You get the idea.

Of course, the question is what we're buying really cheap? Time will render that verdict.