To investment manager Lauren Templeton, trouble is opportunity.
On 9 March 2009, the U.S. stock market bottomed out. Investment manager Lauren Templeton spent the morning scrambling to buy stock. Her husband, Scott Phillips, who is also her business partner, fielded calls from clients as the couple monitored the markets on a laptop.
“We didn’t know it was the low,” she says. “But we did know that stocks were insanely cheap at that moment, and I wanted to buy as much as I could.” She did – until a nurse in her labor and delivery room finally insisted they turn off the computer.
The next morning, Templeton gave birth to her first child, a daughter she named Mary Handly. “We hope she ushers in a new bull market,” she joked with a CNBC reporter.
Lauren Templeton, a member of the Rotary Club of Chattanooga, Tenn., is the grandniece of legendary bargain-hunting investor Sir John Templeton. She’s also one of the few family members who followed him into finance. While her last name lends credibility, Templeton, now 38, is a financial powerhouse in her own right. She manages $180 million of assets as head of Lauren Templeton Capital Management, has coauthored a best-selling investment book with her husband, and often speaks to the financial media. She also helps guide the investment strategy of The Rotary Foundation as a member of Rotary’s Investment Committee.
Her gregarious yet elusive uncle corresponded with his family and business associates almost exclusively by fax from his home in the Bahamas. “He liked having a written record, and it was an efficient way to communicate,” she says. “Uncle John was in his 80s when email became popular, otherwise he probably would have adopted it.”
One January afternoon, she was on the receiving end of one of Sir John’s faxes. It said: “I’m seeding a hedge fund for you with $30 million. Please make plans to meet me in Nassau in the coming weeks.” Templeton was 24 years old at the time, working as a junior associate at an Atlanta-based hedge fund.
“The day I received that fax was both exhilarating and terrifying,” she says. “The idea of managing institutional-size money was overwhelming, but I knew the opportunity to work with him was the opportunity of a lifetime.” So she left her job, took time off from the program she’d enrolled in to become a Chartered Financial Analyst, and went to Nassau.
The two of them devised an investment strategy that relied on numbers and ratios. To keep things simple for the fledgling hedge fund manager, it was limited to the United States. “Luckily the strategy was quantitative and rules-based – it was very hard for me to override,” she says. “That was a good thing because as a young investor, the market volatility bothered me. When we had a negative month, it was upsetting to me that I had lost such a large amount of money.”
Today, Templeton embraces volatility. “Trouble is opportunity,” she says. She even had the phrase emblazoned in gold letters above the doorway to her office. “Buffett, Templeton, all the legendary value investors wait for market disruptions,” she says. “That’s when you find the bargains.”
Chasing the best bargain seems to be in her DNA – an inherited trait reinforced by childhood lessons in opportunity cost. “We always had a pitiful Christmas tree. It would be lopsided and bald in the back,” she says. “My dad and I always went and cut it down. And I can remember one year, I said, ‘Oh, Dad, can we just get a beautiful Christmas tree? I’ve seen them, they have these Christmas tree lights. Can we go there and get one?’ He said, ‘Sure, load up in the truck.’ So we went to the tree lot, and I picked one out. I think it was maybe $20 at the time. He said, ‘I’ll give you the money right now and we can buy the tree, or I can take this money and put it in the Templeton Growth Fund. The Templeton Growth Fund has been compounding at 14.5 percent. Let’s do the calculation and see how much money you’re forgoing if you held the fund until you were 65,’” she recalls. “Of course, you’d get some astronomical number, and I always decided to invest the money instead.” Templeton adds, “Once somebody teaches that to you, it’s a powerful concept. Do I really want this now? Or should I delay gratification and get something better later?”
“Instead of Grimm’s fairy tales, we would tell stories about the magic of compound interest,” jokes her father, Handly Templeton. Investing was a regular topic of conversation at home, even when his daughter, an only child, was young. “If Lauren liked a company, we would buy her a few shares and hang the stock certificates on her wall,” says her father, the son of Sir John’s older brother. He ran a local hardware store and neighboring motorcycle dealership in Winchester, Tenn., the town where he was born and raised, until age 40, when he sold both businesses and invested the money.
“As a kid, I learned to hum the tune of Wall Street Week With Louis Rukeyser,” Templeton says. “I can remember my dad sitting there glued to the TV, watching Uncle John on that show.”
She also remembers her father attending Rotary club meetings, though Rotary seemed somewhat mysterious to her as a child. “I just wondered what my dad and the rest of the men did when they got together,” she says. It became clearer at age 14, when she left to attend boarding school at the Baylor School in Chattanooga and her father gave her a wallet card with The Four-Way Test printed on it. “He said, ‘If you use this to make decisions in life, you’ll always make the right decision.’” His Rotary membership also planted the idea to join a club once she settled in Chattanooga. “If your parents serve and believe in serving, it trickles down,” she says.
After high school, Templeton majored in economics at Sewanee: The University of the South. During a summer studying abroad in England, she met another Sewanee student, Scott Phillips. They married in 2007.
Now the couple run Lauren Templeton Capital Management, with Templeton serving as president, CEO, and CCO while Phillips focuses on investment selection and methodology. In their book, Investing the Templeton Way, they explain and apply Sir John’s techniques. They also publish a quarterly newsletter for the public on their investment approach called The Maximum Pessimism Report.
“We’re always looking for where the cheapest stocks are in the world,” Templeton says. “We let the stocks tell us where to invest. That’s how Uncle John did it.”
“During the crisis, Lauren played a huge role in driving this firm’s return,” Phillips says. “Even experienced people were losing their minds. They were saying, ‘Get out, we’ve never seen anything like this before.’ She was going into the market every day and making those purchases that led to the growth of our firm. That takes a special person.”
A contrarian investor like her great-uncle, Templeton has become skilled at not following the crowd. “You have to distance yourself from the herd when it comes to investing,” she says. It’s not easy. “They’ve done research and found that the same part of your brain that experiences real pain is also where you feel the pain of social exclusion.”
While she’s not afraid to go it alone as an investor, Templeton enjoys a large network socially. “When you meet Lauren, she’s personable and her intelligence comes leaping through,” says Scott Wilson, a fellow member of the Chattanooga club.
It was her network that led to her first success: In 2001, she started the first association for hedge fund managers. The community was small and needed a way to connect, she says, so she created the Southeastern Hedge Fund Association. Templeton acted as president until about two years ago. In that time, the group grew, affiliates formed, and there’s now a hedge fund association in nearly every major U.S. city. “It changed the industry,” she says.
It also got her name out there, which Templeton suspects may have contributed to her great-uncle’s decision to seed her hedge fund. While she never asked him why he picked her, she says she wasn’t unique: “Sir John was well-known for identifying a young person and giving that person an unprecedented amount of responsibility.”
The practice fit his bargain-hunting philosophy of betting on untapped potential. “He knew you’d probably work hard because this was your big opportunity,” Templeton says. “I learned so much that I couldn’t have learned any other way.”
Sir John died in 2008, and Templeton strives to maintain his standards as an investor and leader. “His investment legacy was that of an independent thinker,” she says. “Leadership requires making independent decisions based on sound, thoughtful judgment and, most critically, behaving in this way regardless of whether people agree with you. If I can behave following even a portion of his example, it will be a service to both his legacy and my clients.” — Vanessa Glavinskas