Sir John: Before He Lost It, He Really Had It

(MoneyWatch)  Whenever great investors are interviewed, they almost invariably say how simple what they do really is. The reader is trained to think that the wizard must be hiding something: It can't really be that easy.

I've been studying the obits of Sir John Templeton who died the other day at 95, and I've come to believe it's as easy as they say. The hard part is remembering how easy it is.

Sir John (he got the Sir by renouncing his U.S. citizenship and moving to the Bahamas as part of a tax dodge) is now best known for his philanthropic work that focused on "progress in religion" and the awarding of the Templeton Prize. Never mind that for thousands of years, progress has often ordinarily from the abandonment of religion. (Exhibit A: Galileo; Exhibit B: Iraq. I rest my case.)

But let's focus on what Templeton did well to earn the fortune he proceeded to squander on charity. Two things: He stuck to value investing and he popularized the mutual fund.

Value investing, whose best known proponent is Warren Buffett, is simply the idea of finding assets that are undervalued relative to their earnings. Nothing could be simpler, though in an efficient market it can take a lot of work to find investments that fit the bill. The problem is it is so simple that many investors feel they must have an angle, something complex, something impressive, and -- more important -- something that generates fees.

The mutual fund is a great thing because it allows people who are bored by or lack time to do the work to piggyback on the efforts of those who can. These two ideas made Templeton one of the world's richest men.

A big part of Templeton's legend, picked up in all the obits, but stated here by the Times was what Templeton supposedly did in 1939:

When World War II began in Europe, the 26-year-old investor borrowed $10,000 and bought 100 shares each in 104 companies that were selling at $1 a share or less, including 34 in bankruptcy. A few years later, he made large profits on 100 of the companies; four turned out to be worthless.

Templeton was essentially throwing darts at a board. His genius was not aim, but picking the right board, companies likely to be undervalued based on share price alone.

Templeton was no doubt a very smart man: Yale Grad, Rhodes Scholar. But his real smarts laid in never getting too smart.

Later in life he got silly in how he gave it all away. We'll just have to forgive him that and remember instead how he got it.