YouSaid · the spoken record

Scott Phillips

lines on the record: 57
first: 2023-12-22
most recent: 2023-12-22
sittings or episodes: 1
sources: podcast

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“Daily. And so Lauren and I discussed it. And if you are interested in a copy of this and you are US resident, we're not going to necessarily send all these overseas. Just go to our website, find our email. Let's connect at simpleton phillipsu. You'd like a copy and we'll send you one in the mail. Send your address to you. But yeah, it's been a lot of fun and I appreciate the opportunity to speak with you today.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, absolutely. No, I really appreciate the time with you too, Clay. It was a fun discussion. And I love talking about, Sir John. He's a very large figure in my life and I'm forever indebted to him. Anything I can do to honor his legacy is, I'm always more than happy to have the opportunity to do that. So yeah. But if you want to follow us or learn more about how we look at things or how we're trying to further that investment legacy as investors in what we do to our website, we have a commentary that we put out periodically. Our website is templetonphillips.com. Sign up for the commentary. We've author books. They're available on Amazon. They're listed on that website. The other thing I'll say is we recently printed this, which is just a little pamphlet of Sir John's quotes. And I reference this all the time, certainly weekly.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. I mean, the generation that went through the depression and then World War II, those were kind of circumstances. I mean, just horrible. It tested every fiber of those people that went through that. And yet they emerged and came back and built this industrial boom that's never been rivaled since. When you start from like the 1950s as a starting point up to the current day, I mean the American economic miracle is almost unfathomable how much has been accomplished since then. And so it's really just a matter of empiricism. But believing in humans and our ability to persevere and overcome.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Euphoria, he could get on the other side of that too. But those are always short-term kind of trade oriented things. He was without question, a long-term optimist. It pays off. If you're an investor, it doesn't make sense to be pessimistic all the time. It's like trying to short the market all the time. That's a dangerous idea.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“And higher and higher and higher and higher. So, I mean, now in Sir John G is the example, and I'm sure Warren Buffett has too, because I think he has the same kind of mindset around these things. You know, someone in the lower income or more modest means of today's society lives far better than the Rockefellers did back in their heyday. And so the standard of living and the things we have at our disposal, they just keep getting better and better and better. And as an investor, you can participate in that, of course. And that's what you should be focused on doing over the long term. And so, yeah, he was an optimist. And I think you have to be an optimist to be a really good investor. Now, what's fascinating about him and his psychological makeup was he did have the rational thinking and temperament to short the dot-com bubble and do things, you know, that, well, we're pessimistic. When he saw the unbridled optimism,”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“You know, I think there are a number of thoughts come to mind. You know, one thing I'll say Empowering individuals to go and pursue life and create wealth. I just think he saw it on all those levels as an investor and just as a human being. And I think he stood in all of that. And I also think there's something interesting that I think about the human mind, which is its frailty in just seeing the real effects of compound interest over time. And compound interest, we can think of it mathematically, but we can also think of it in terms of human talent and discovery and scientific research and how these things build on each other over time. And you think about computing in Moore's law and all the progress that came out of that. And I think just fundamentally, most people are too short-term in nature and focused. And it's easy to get caught up in the negative headlines. They absolutely get our attention. But in reality, when you look at the standard of living, it's only”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“The last 12 months, it's very difficult to make money as an investor. So you just go back and you look at like Microsoft, another company that has just, they've done an extraordinary job as a company. Great company over the last 20 years. They've done a lot of things right. But if you had bought them in 1999 trading at 23 times sales, you would have been lost in the woods for 16 years. You didn't make money for 16 years, even though it was still a well-run company throughout that period. They got into gaming. They built out the cloud and fought off Google. They've done a lot of things right. But if you don't get the valuation right, bad things can happen. Let's put it that way.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“It did, it did. And what's interesting now, though, is just how with the AI fervor, it's all kind of selectively come roaring back. The market, it just never ceases to surprise you for sure. But when you can draw on your experiences and they date that far back, it just reinforces your conviction because you've seen it before. And it's hard to figure out the particulars, but you can kind of see how things are going to end up. So I think the big lesson that people need to realize, you know, if you're looking at NVIDIA, what a great company. I mean, we don't own it. But, you know, they've done everything right. You know, they got into the gaming chips and now the AI chips. They've been a step ahead of the industry, fast sales growth, high margins. What more could you ask for in a company? But, you know, when you're trading at 30, 40 times sales, which I know they have been within.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Super Bowl back in 2000 and the sock puppet and all of that stuff. And so it was just super familiar to me. And then, you know, in terms of, you know, what we were shorting during that period, and again, shorting is not constant feature to what we do. But occasionally when we see things like Sir John, it makes sense to put in some downside protection. And if it goes well, maybe you'll even profit with excess returns. Yeah, I mean stocks back in 2000, the ones that, you know, Lauren was shorting when she started out, like five times sales was an exorbitant valuation. And at the end of 2021, I think there were almost 800 stocks trading at 20 times sales. It was just, it was crazy. And, you know, it just didn't make sense. And of course, no one, we couldn't predict what would make it stop.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Everything about that period, just I can see it like it happened last week. These images, just all of the experiences stick with you. And it kind of becomes a frame of reference. And I think that's the benefit of being in the markets for a long time. You start to accumulate these experiences. And I remember I mentioned earlier kind of the fervor and excitement of being on the sales side during that period. trading was exploding all the deals were up there were steak dinners you know you got bonuses in your in your paycheck you didn't even know were coming and then i remember vividly 2001 and 2002 and that environment turned into monthly layoffs you know across the the whole firm so it was it was just kind of a getting a master's class in market psychology and how these things go and then yeah i remember the ads from the”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“It was probably about two years later that Sir John was preparing to cede her. And so she was in constant contact with him. And I remember vividly my father-in-law was participating with Sir John in that short strategy. So they were shorting stocks that right before IPO lockup that they thought would decline. He did it for a few months and he said, you know, it's not worth it. I can't handle the stress of this. It's too much. But obviously, you know, Sir John kept with it. And that trade went against him for a while too. He was early, but he held on. And I've heard that he shorted more that was kind of outside of our purview on the same basis.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“It's another key input for sure. It really just goes back to both Lauren and I started our careers. Let's see. I got into the industry in November of 1998 and I worked on the sell side and research department of an investment bank that was owned by, eventually owned by Suntrust. It's called Robinson Free, now it's Truest Securities. And so the first things I saw were the internet bubble and how I worked on, it was a low man on the totem pole on a bank research team. And let me tell you whose phone didn't ring during the dot-com bubble. It was the bank research teams. But, you know, the internet analysts and all these people were just having the time of their lives. And so I remember vividly just that environment. This is one of my first lessons and what a fantastic lesson in human psychology to start at that time. And Lauren started a year later. She was a year behind me in college. And so”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Of cautioned us on these environments where he said just generally that when he started on Wall Street, there were only 12 analysts, 12. Now they're, what, over half a million CFAs. He certainly thought that the job of professional and money manager is far harder than when he first started out. So you really have to be diligent about looking at things that are out of favor and neglected. The great thing about small caps is you can find companies that don't even have analyst coverage. I mean, that's like a veritable playground, you know, for real research analysts.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Matter, you know, if it gets hammered, you'll be okay. You'll survive. And if it goes up exponentially, you'll benefit. So, you know, there are lots of ways to approach that risk. But yeah, I think the chase for quality is probably it feels crowded to me. We've done it too. But really, when you think about the last time we bought a mask, it was kind of back in 2020. Because I tell you, every time I read a manager's comments or see them interviewed or see a podcast, it just feels like everybody's looking for you the exact same thing. They want steady cash flows. They want the quality. They want the durability. And when you get too many people chasing the same thing, it's hard to find those opportunities. I mean, a lot of what we do around quality has to take place during big market dislocations because it's the only time you can really get a bargain doing it. And Sir John always kind of...”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“And I really, now that I'm thinking more about that Alibaba decision, a lot of it was tied around a fear over that VIE structure. You know, at the end of the day, what do you really own? You own a tracking stock if you own it through the ADR. Now, you could go buy it on the Hong Kong exchange. I think that's probably wise. I doubt that I think all that regulatory stuff is likely calmed down for now. I think China's going back the other way. kind of realized that they've ever corrected and they need outside capital to come in, which is very helpful. But yeah, they're tricky questions. I mean, but when you've got a whole range of stocks to look at that appear discounted, you can kind of pick and choose how you want to engage and what kind of risk you want to take on. Sometimes those risks are just too hard or too uncertain. Or maybe you just buy a smaller position. That's the other way around it. Decide you just can't stay away. Just buy a 1% position or something that's not going to.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“There is no plug in our DCF or a CEO disappearing in the middle of the night. So the risks there, there are real risks. But at some point, valuations get so low that they certainly get on your radar. And they're on our radar. I just honestly don't know yet. But yeah, the valuations are really low. China will continue to be a powerful economy. They've got some issues for sure with the property and the regulations. But I think it's a dangerous idea to just write it off for good.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“That we feel like we need to do it. It's one of the very few times we've ever ridden kind of our quantitative discipline from a cell standpoint. And so that worked out. But I mean, the stock went up for several more months. We certainly didn't time it well. But yeah, I think that, you know, looking at it today, it keeps hitting my screen. Alibaba trades at seven and a half times earnings. I mean, it has my full attention. I'll say that. Where do we go from here? I'm not sure. But I do take notice of investors saying China's uninvestable and he's really, and I see where it's coming from, and I agree that if you don't know where you stand from a property rights standpoint, that's a big deal. So, you know, I haven't forgotten what happened to the people invested in the education stocks a couple of years ago, wiped out overnight. I think they've come back now since. I read that somewhere. But anyhow, those are difficult matters. I mean,”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so I mentioned earlier Alibaba, we own that from, let's just say roughly mid-2015 to mid-2020. We haven't owned anything in China since. And part of that was just the changing geopolitical environment. Like I remember, you know, making that Lauren and I discussing that decision in mid-2020, because there were still cheap stocks in the U.S. during that time. Market hadn't fully recovered. But you had all the back and forth between Trump and Xi. And then you had the regulations coming in on the tech companies. And it was one of the situations where quantitatively we didn't need to sell Alibaba, but just sheer unease with the risk environment prompted it. Now, I remember thinking, I've got to call our clients and say, we're going to do this. There'll be some capital gains. I'm sorry for that.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Or doing business in their local currencies, which means they're not going and buying dollars. So if we continue to run these large deficits, you could make the argument that you need some diversification away from the dollar. I don't think you need to go crazy, but it probably makes There's a lot to look at and think about. And you don't hear a lot of people advocating that or doing that right now. It's picking up some steam, but it's still far off from where it came.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Five or six years or more. So you could go look at the UK and find some great companies, reasonable multiples. So we haven't done any buy-in there lately. But last year during the 2022 during the war in Ukraine, when that broke out, European equities generally just, they really got overly pessimistic. So we did buy some stocks at that point, both in the UK and mainland Europe. So there's a lot to look at and think about. And I'm not, I wouldn't say we're doomsayers on the dollar, but their real concerns about the budget deficits and the impact that's had on the stability of treasuries in the last year or two. You know, a lot of investors don't really see that. Foreign investors don't see that as a safe space they once did, for lack of better words. And you're seeing because of the trade realignments, a lot of countries”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Stock picker. You're kind of reverting back to an environment that Sir John thrived in, where a country-specific discount can emerge and it's doing its own thing and it's not tied to the U.S. Federal Reserve. You don't have to worry about all the gaming of when the rate cuts are going to appear and how that affects duration plays and equities and so on. You're kind of playing your own game and you don't have a lot of competition to look at those stocks. And so that's like the perfect environment to pick. You know, if you look at a market like the UK, it's been out of favor for wow six or seven years. It started with Brexit. If anyone even remembers that, that was a disaster for UK equities. Everyone got too confused by what was going to happen in the trade alliances and the euro. And then COVID hit, you know, another disaster, basically for every economy. And then the inflation came. So that market has just been left behind for.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“And hurdles from an investment standpoint. But the arguments to take a closer look at international stocks are certainly compiling. Just look at what COVID's done to trade and the way trade is realigned. You know, China is no longer our largest trade partner. Mexico is. There are issues kind of all over from a supply chain standpoint. It's raised the costs of doing business. And so U.S. consumers are paying more. At the same time, there are also important advantages, which are the central banks in the emerging markets, in particular out of step with the US and developed markets, meaning that they're already through their tightening phase. They're looking at cutting rates. And we're still tightening and combating inflation. So what that really means more than anything else is that the markets are separating. Like if you're a”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Growth stories, but at those valuations, they could do well. So that's where we're spending the majority of our time really from a research standpoint is just getting that same wish list ready to go. And, you know, there are just tons of examples of just companies, pretty well-run companies trading at book value. But people don't want to pay attention to that because you've got the AI momentum play and the magnificent seven. It's just human nature. And then on the international side, oh gosh, you know, it's been a disaster investing there for the last like 10 years. It's vastly underperformed the US market. The valuation levels are very low. And I think, you know, in both cases, whether it's U.S. small caps or the international space, you're looking at evaluations relative to U.S. large cap stocks that are as low as discounted as they've been in the last 25 years. So we're talking about some really low.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Allocation programs through more debt issuance or staying relevant in their industry by issuing more debt at these low rates. And so the problem is, you know, when you get into kind of a classic recession and credit, really contract. It's already in the process of contracting, of course. Those companies will have financing problems. And so that is a more legitimate kind of paw hanging over the small cap space because a lot of them do legitimately have higher debt balances and floating rate debt that could be challenging to sustain or refinance over time. But if you're willing to go in and take a more granular look and look at the individual names, there's a lot of interesting stuff there. So you can find stocks trading well below 10 times earnings, three, five times cash flow, five times EBITDA. These are pretty well-run companies. They're not necessarily big.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“As we know, about the prospects for a recession. Everyone's been forecasting it for a long time. It hasn't happened. We'll see. I think there are parts of the economy that you could argue are in recession. But nevertheless, that's certainly a big piece of why small caps are discounted, because they're not likely to bottom before the recession. So people are just kind of sitting on their hands in that regard. But also, and I think this is more valid as an argument, it goes back to the misallocation of credit and debt over the last 10, 15, 20 years, maybe not 20 years, but since the great financial crisis, the zero-bound interest rate regime, with small caps, they just don't access capital markets the way large caps do. They hold bank debt typically. And a lot of it has floating interest rates attached to it. And a lot of these companies have been kind of sustaining their capital.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, you hit the nail on the head US small caps and international stocks, I think, are both very intriguing. You know, with US small caps, if you look back over the history of the market, it's really unusual for large cap stocks to lead the market and have the superior returns over time. It's always been small caps outperformed by a hefty margin. And really, when I think about the last gosh, 15 years or more, small caps have been very expensive. They've been at a big premium because that's where typically a lot of the growth is. But that's really changed in the last few years, especially through COVID. And there are kind of two things I think they're at play there. First of all, there's the conventional wisdom that small cap stocks will lead you into the recession, right? Then they'll be the first ones that lead you out too. So it's kind of this double play. And so I think there's a lot of anxiety in the market.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“He saw an opportunity there that was worth ditching all these other things that were working fantastically well and going into. And of course, as we know, in hindsight, it was the start of fantastic, maybe one of the largest bull markets the U.S. has ever had going from 1982 to”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“In the Tilburgen Growth Plan, he was rotating out of Japan and into the US in the early 1980s because he said that, in his view, the US stocks were the cheapest they'd ever been in his lifetime, including the Depression. And so that takes enormous self-control and discipline to be sitting in a portfolio that's working extremely well and then see these huge bargains in your view that no one else agrees with. That's why they're huge bargains. People think you're crazy if you go into them, but he did. And he rotated 62%, I believe. It was over 60% of the Timbledon Growth Fund into U.S. stocks in the early 1980s. This is around the time when Volcker was raising interest rates to kill inflation, commodities were the big investment deal in the US. The death of equities headline on Newsweek had come out.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I mean, the basic reality is, and he said it, you want to have better performance in the crowd, you have to do things differently from the crowd. And so that means at a very basic level, at some point you've got to break with consensus and go into an asset that is not working, that's discounted, and maybe continue to be broken or neglected or unloved for a long period of time. So yeah, going back specifically to his career, I would say that when you look at his investments in Japan, obviously those are out of favor for 15 years or so before they really started working in the 1970s. But then even more interestingly, when they did start working, they worked for a very long time, 20 years, culminated in a bubble that technically the Japanese market still hasn't recovered from. But when you kind of trace that back and look at his portfolio,”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“The problem you're going to run into if your idea is to hold and let things compound, you go into a cyclical kind of NAV style investing relationship, big discount to NAV like a steelmaker or something like that. You know, you're going to have to sell it eventually with something more consumer driven with this kind of long growth runway. You could potentially hold it for a very long time, assuming all things being equal, the risk or appropriate devaluation stays low enough and so on. So we actually ended up holding Alibaba until May of 2020. That's when we sold it. Replaced it with the US stock.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Indifferent whether it's five years or ten years at that rate. That's a great return. We'll give it a long leash. And then moving alongside that, you know, during the taper tantrum, emerging markets fell out of favor. And Alibaba had the great misfortune of IPO Wayne at a ridiculously high price. I think it was the end of 14, early 15, and promptly went down 30, 40, maybe it was 50% over the course of the next six to nine months. And that too had a similar kind of return profile when you modeled out the growth and saw the market potential and then the valuation and where it collapsed, it was also kind of a 2% to 300% upside scenario. And so in either case, those assets to us, from our perspective, were almost interchangeable. And interestingly, they both, and we, let's be clear, we make mistakes as investors too, but both of these worked out. And I think actually ArcelorMato did a little bit better. From my total return standpoint.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“It's usually, you know, it depends on the amount of upside, but we're willing to give that scenario five years. You know, if it's a much deeper discount, we'll give it 10 years. You kind of measure out the IRR. So one good example, when you get discounts that are deep enough, you kind of get indifferent towards the asset itself. So here's a good example like going back to, let's see, this would have been in the period of right after the Eurodebt crisis and into the taper tantrum in the emerging market. So kind of like 2011, 12 up until 2015. So around 2012, 2013, ArcelorMittal, the European steelmaker that emerged with the Indian steelmaker, was trading at less than a quarter of its book value. I think it got down to 10% of its book value. So when you model that out, there was 300 or 400% upside.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“And that's how you have to look at it. And most people, you know, in that moment would say, you're crazy. What are you doing? But it just makes total sense to us. But it's hard. And I really think that you have to go through one of those cycles and force yourself to do it and see the results to understand how to do it again. And 0809 was that for us, for sure. It made a big impact on us both as investors and returns and everything”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“It's a big mistake. I think that you've already demonstrated you're not a market timer. If you were, you would have been out of those stocks. So don't memorialize your mistakes and submit your position as a bad market timer. You have to take advantage of the new opportunities that have been created. And that was Sir John's mindset. And that's what we try to do as investors. So for us, there are long periods of inactivity and studying and looking for things that are out of favor. But by far the best environment to invest is when you get those wholesale sell-offs, when you get the force selling, the margin-based selling. Because then, you know, to us, risk is overpaying for an asset. That's the value perspective. But when prices decline that much, risk has gone down that much too. So it's almost like, you know, a lot of your potential mistakes are going to be covered up by how low you're getting the stocks. So it's actually the lowest risk environment you could dream of to make an investment.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Happens in the future, you don't have to predict it. You just have to know how you're going to handle it. You have to upgrade your portfolio. You have to say, I can't time the market. But I do know that I'm going to come out of this better than I went in. And if you have that attitude and have a process to drive that out, you're taking control of the situation. You're reframing it. And you're turning what could be a deep negative into a positive. You're finding that positive in what is an overwhelmingly negative event. And the other big thing is that, and a lot of people say, well, you know, how did you know to have so much cash or, you know, isn't that market timing? We did add cash because, but that's an organic process that comes out of not being able to find bargains. So cash will build up if we can't find the 50% discounts that we want. But for people that want to de-risk or raise cash in those environments, I think.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Or level of reinvestment to as high a level as possible without having to report DAP earnings and not worrying about tax liabilities, just constantly reinvesting. And then once we understood that, said, okay, well, that actually makes sense. But that was in 2016 or 2017. So we looked at the valuation and said, that's interesting, but no. But we always kind of knew a price that we'd want to pay for it. And so when it hit nine times cash flow in March of 2020, we acted. And we knew that we have to do that if we're going to generate excess returns. It's a matter of just living up to your word, keeping your word, doing what you say you're going to do on behalf of your clients. And so we just had a whole list of stocks. We knew we were going to take that action. And when it presents itself, you do it. And I think the important lesson is whether it's COVID or 2008, 2009, or whatever happened.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Low credit expansion because the environment of just debt being issued nonstop with almost no repercussions could not last indefinitely. And so we had a list of companies that we thought that we would like to own in that environment. We saw that as a likely outcome from whatever happened, whatever broke that current paradigm. It ended up being COVID. We were prepared and we knew what we wanted to buy. We knew the valuations that we wanted to buy them at. One example was very uncharacteristic, but again, being flexible and open-minded is a huge piece of Sir John's investment philosophy. One of the stocks that took us a long time to understand, and I think we just actively ignored it for many years, was Amazon because we didn't. That just seemed like a growth stock. Its valuations didn't make any sense. But over time, you saw that what they were really trying to do is just”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“To people's lives that try to create peace of mind by doing these things. And so that's kind of the purpose driven side of it. Now from implementation standpoint, it's actually, it just requires a lot of study and patience more than anything. So going into 2020, we had still to some degree have still been kind of alarmed about zero bound interest rates and the way capital was allocated over that 10-year period going into COVID. Of course, we didn't know that COVID would be what it was going to be. I don't think anyone did. No one predicted that. That's an important lesson too. But we were prepared for whatever was going to come. So we had a list of companies.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“In the market. That too is very difficult. But I think that from a behavioral standpoint, what we've kind of learned from Sir John is that you can still do this. Human nature is still at play in the markets. And so as a money manager, you have to make a decision that that's where, or at least in our case, that's where we can add value. We can do these things that from a distance people say, oh, yeah, we can invest like Warren Buffett. I can go and buy her, I can do this like Sir John. But time and again, history shows people can't really do that. It's very hard. And so when you tie up kind of your identity and your investment strategies and everything you want to do for your clients becomes that, well, you're going to execute on it. Because then it becomes almost like an existential thing. It's like, wow, this is what I am. This is what I do. This is how I value.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Deeply honest, introspective, self discussion. Like, what is realistic? Where can I add value? Am I going to go out and compete with a multibillion dollar hedge fund that has satellite imagery and unstructured data to get the next edge on customer accounts at shopping malls at Walmart or oil fields or cargo, you get the idea. Like this is intensely competitive forces at play if you think that you're going to trade in and out of stocks or game the next earnings. That's a difficult challenge. Similarly on the quant side, you've got your work cut out for you there too. Do you really want to go compete with a team of PhDs from MIT who are working with cutting-edge machine learning and AI technology to develop a better model and mine these little alpha inefficiencies?”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“So it's well, it's where we think we can add value as managers. I think that, you know, one of the most important things you can do as a manager is to recognize you're in a highly competitive ecosystem. You are competing with hundreds of thousands, if not millions of other investors. And so you have to think about your role in that ecosystem and where you can add value. And so we like to say that they're basically three ways to generate excess returns in the markets as an investor. Better information, which is what most olive Wall Street is geared towards doing. And you could have a better financial model. Those are the quants. Or you could have better behavior, which comes through in temperament. In any one of those three, a combination of those three can provide an edge to you as an investor. And so what you have to do is make a decision.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“He did. He took the course from him postgrad. So he had already finished Yale and Oxford and was working on Wall Street and the security analysis class was offered at night to working professionals. And so John took it.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think even just kind of taking a look at unpacking some of that initial trade in World War II is informative. I mean, first of all, he had the conviction to do something that most people thought was crazy. But it also, it was a very well-designed and thoroughly researched idea. Like there was a lot of purpose behind every step in that transaction. First of all, he had the asymmetry you wanted as a value investor. He thought, well, if I lose $100 on this, it'll be offset by another position that'll go up 10x. But then also he had gone back and studied that the right You know, he sold that business in 1968. And in his mind, he was basically done. Like he was moving to the Bahamas. So by this point, the business was, I think, the 10th largest investment firms in the country. So it had been wildly successful.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“You encounter a lot of young people today, and everything is driven by the phone. I remember, I think it was a few Halloween ago, my oldest daughter had a bunch of friends come over after they were trick-or-treating. And here were 10 girls all in a room together. You would think you would hear all this cackling and talking. No, they're all quiet in our living room on their phones. None of them were talking together. They were all on their phones. This is the strangest thing. And so I think, you know, from a parent standpoint, you have to find ways to offset that behavior because it's not productive. It's not the growth mindset, we should say. It's not going to help you, I think, in the long term. So yeah, it's hard. That's what I'll say. It's very hard today. No question about it.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Something that is probably not the best use of their time. They're not learning anything. And so the big thing I think that we've done as parents, summer camp is a huge one. Both girls have gone to summer camp since they were probably eight years old for five weeks. And when you get there, the phones go away. They have no access to that. And so you have to do, it kind of takes them back to what childhood was like for the rest of us pre-internet, which was if you needed something to do, well, guess what? You had to figure it out. Like you had to think and take risk and make choices. No one's going to sit there and spoon feed you your entire day and helicopter over you and make sure that all these outcomes are being generated. And it really has enhanced, I think, their willingness to try new things, their ability to interact socially. They value, I think, conversations more.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, of course. You know, that I mean, the things you just describe are foreign even to my childhood. I mean, we didn't have these levels of instant gratification. And, you know, it is challenging. But I think, you know, the most important thing is giving them the independence to take risk and knowing the value of character and understanding the value of a dollar and where it comes from and what it took to earn it. You have to make those connections forcible. And it takes a lot of work because a lot of the things going on, our conveniences lie in the face of that, especially if they're on social media and looking at the messaging and just constantly being sold things. I mean, these kids, everything is an advertisement. Everything is geared to get their attention, to distract them, to make them focus on.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“All of his behaviors going forward. So they were profound. So both finding the positive within the negative and then kind of the financial practices of being a saver and preparing for new opportunities and not wasting anything. There was a great story of him even prior to selling the Timbledon funds where I think it was Marty Flanagan told us in the Timbledon Touch, or maybe it was in another conversation, but he said he walked into the office one Saturday and he just kept hearing this bam, bam this banging on the table. And he was looking around. He couldn't figure out what it was. And he walked in the Sir John's office where it was coming from. And Sir John had gathered up unused scraps of paper and was stapling them into a new legal pad. He wouldn't waste anything. And so he was one of those people who just lived it to the fullest. He was completely authentic. What you saw is what you got. So it's impressive.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“A lot of people that were affected or lived through the depression, they just have completely different attitudes towards scarcity, wastefulness, saving. Surge on saved 50% of everything he made. And he didn't have to do that. I mean, even like, you know, when Lauren and I were working with him, he was still just extremely frugal and didn't waste anything. Lauren and I both were call after the Asian financial crisis. He had bought Kia Motors and he had invested in the Matthews fund as well with the Matthews Korea fund and just made a large sum off of those investments and still refused even at the prodding of his assistant to go buy IKEA automobile. He said they were too expensive. Finally she kind of tricked him into doing it. But that was always his attitude and that was baked into who he was. So those experiences from the depression, you know, when”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“Like he had ups and downs in his money making ventures. And he wasn't necessarily a saver. And so both Sir John and his brother, Lauren's grandfather, they were deeply affected by that. They both became intensely frugal and thrifty. And so I think between the experience of wanting financial stability by watching their fathers ups and downs, but then also watching what was going on in the Depression, both were big savers. And so when Sir John went through the Depression, whether it was at Yale or when he was beginning his career on Wall Street, he knew that he wanted to be this figure that could generate wealth for people. But he also knew that he needed the same exemplary habits within himself. And so it was a huge piece of who he was. And it was authentic all the way through. And you saw that.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT
“And room and board and food and support himself in the last quarter, he made through playing poker with his classmates. And so, you know, that was kind of the legendary view of what his mind was like and what he could do in terms of working with numbers and probability and reading emotions across the table. But what it really did, you know, taking a step back, it did really two important things came out of that. First, And he said this. He learned that I learned that it seemed like this huge tragedy at the time when my father couldn't support me anymore, but it was the best possible thing that could have happened. Because if that did not happen, it would not have worked as hard. It would have not gotten to the top of my class and I would not have obtained a Rhodes Scholarship to go to Oxford. And then the other piece was because, you know, his father was very successful, he was also more volatile.”
2023-12-22 · We Study Billionaires · TIP594: Contrarian Investing & Sir John Templeton w/ Scott Phillips · IDENTIFIED FROM THE TRANSCRIPT