There are certain words that crop up in discussions with money managers, and John Marks Templeton knows them all.
But in his 50 years of money management, he has been just as likely to weave God and patience into a paragraph as yield and return. In today's market, there's more of a connection than usual.Templeton, widely regarded as the dean of international investing, controls 52 mutual funds worldwide, with $15 billion in assets.
Of the seven available for sale in the United States, four are global stock funds that have underper-formed the overall market and the global-fund segment this year, and the other three are doing about as well, or a bit more poorly, than others in their segment.
Two of the global funds - the $3.6 billion Templeton World Fund and the $679.7 million Templeton Global Fund - have taken a serious beating.
But Templeton, who turns 78 on Nov. 28 and says that strong religious beliefs underlie his investing principles, is unperturbed.
"It's all a question of patience," he said. "In our 50-year history," he added, on a recent visit to New York, "there have been other years, sometimes two, when we have lagged the results of others. That will always be the case."
But why, specifically, have the two big global funds been hit so hard? There are several reasons.
Templeton, whose investment empire is headquartered in Nassau, the Bahamas, is a global manager and a value manager, too, hunting for bargains among companies all over the world.
But value managers, as a group, have not done very well this year.
"Value managers usually do poorly going into a recession but pick up steam and perform better as a recession takes hold," said Don Phillips, vice president of Morningstar Inc., Chicago-based mutual fund consultants.
He argues that "this is a terrific time to buy Templeton funds" because prices are so low.
Another reason for the funds' slippage is their focus on smaller companies. Stocks of smaller companies, especially the emerging growth stocks favored by the two Templeton global funds, have been hit hard this year.
Not that that has shaken Temple-ton's belief in them. Indeed, the Global Fund is being renamed the Smaller Companies Fund; its entire portfolio is invested in that market. The World Fund is about two-thirds invested there.
What has also hurt both funds is that they are heavily invested in the United States.
Global is 61.4 percent in American stocks; World, 47.8 percent. This year, international stock fund managers have beaten their domestic counterparts by four full percentage points, according to Lipper Analytical Services, which tracks mutual funds.
There were other problems for the two funds. They held virtually nothing in health care, a sterling performer this year.
(Templeton believes it is overpriced.) And they hold big positions in financial services - 14.4 percent of the Global portfolio and 24.3 percent of World's - which has done poorly.
But Templeton believes financial services companies will be good bets over time. He has bet heavily on mutual fund companies and brokerages with large fund businesses because, he says, mutual funds are the most rapidly growing part of the industry.
"Americans have a thousand times more invested than they did 50 years ago, and it's only the beginning," he said.
As for banks and insurance companies, he says "the risks on the downside are small" compared to upside potential.
"If they recover - and most banks will - you earn three to four times the amount of your present investment," he said.
Clearly, his is a long-term outlook. His funds hold stocks for an average of five years, one of the longest holding periods in the industry. And he plans no major changes in his hold-ings.
But, he said, he is always looking for better values. "It is our custom to buy shares at the lowest price in relation to what we think companies may earn in the long term," he said.
He sells a stock whenever he can find a comparable stock that is 50 percent cheaper. Right now, he sees bargains galore.
In August, he began buying stocks heavily, but will not say what he is buying.
Among his biggest holdings in World Fund are National Australia Bank Ltd. and Merrill Lynch.
In Global, they include the Quantum Corporation, United Carolina Bancshares and Atlantic Southeast Air-lines.
He contends that the United States is in the later stages of a bear market that began in August 1987, and predicts unprecedented global prosperity over the next 40 years.
His optimism is reflected in his just-published book, "Riches for the Mind and Spirit," comprising inspirational writings from the Bible, history, literature and other sources.
His strong spiritual sense - he is a devout Presbyterian - is also reflected in the Templeton Prize for Progress in Religion, worth $800,000 this year, which he endowed because "the laws of love and charity differ from the laws of mathematics."
How? "The more we give away," he said, "the more we have left."