Are Templeton Global LIC (TGG) Shares A Buy?

Are shares in the Templeton Global Growth Fund Ltd (ASX: TGG) Listed Investment Company (LIC) a buy in 2019?

Templeton Global Growth Fund’s Value Investing Style

Templeton Global Growth Fund is renowned for sticking with a rigid value investing approach in terms of the valuation metrics (price-earnings, price-book, etc.).

Despite the “growth” description in this LIC’s name, TGG likes to highlight various valuation measures of its portfolio. On metrics such as price to earnings, cash flow and book value, its portfolio appears far cheaper compared with the MSCI World Index.

Portfolios that were positioned this way just prior to the year 2000 enjoyed a great decade afterwards of relative outperformance. I can recall at the time many investors were asking if value investing was dead. This topic has also been heavily debated in recent times. If you are considering investing in TGG I think it is worthwhile considering where you stand on this debate before buying in.

The value investing approach may also be suffering because over time active fund managers have exploited all the obvious opportunities. Too many were trying to do it, and all the easy outperformance may have been eaten away. Technology has made it easier now for fund managers to conduct stock screens and identify shares in which clear value exists.

Some investors believe global central banks have also provided so much liquidity over the last decade and this is structurally leading to a bias for growth shares.

The Return Of Value Investing?

A quote by Sir John Templeton, one of the most famous investors of all time, sums up why value investing may be due for a comeback: “The four most dangerous words in investing are this time it’s different”. Are these four words being used now write-off the value investing style?

As I mentioned above the current negative sentiment towards value investing strategies does feel a little bit like 1999. Older investors might also remember the “Nifty Fifty” boom that came to an end in the 1970s. Investors were fixated with around 50 or so larger stocks that had such fantastic growth prospects. This supposedly meant you could pay extremely high multiples of profit and hold for the long term and everything would work out okay. This did not end well when the bear market of 1973/74 hit.

Another argument might be that the surge in passive investing and Exchange Traded Funds (ETFs) over the last decade has created abnormally high valuations in the better-performing shares. Money that flows into passive ETFs will invest more into the leading companies in the regardless of valuations. This trend could easily reverse sharply in a bear market.

Buy, Hold or Sell

If you think value investing could be about to outperform, TGG is a suitable LIC to consider because its fee structure is lower than many of its competitors and it pays dividends annually worth 3% of the pre-tax NTA.

However, if the fund doesn’t improve its relative performance over the next few years its future could be in question. That could limit some of the downside associated with the discount to NTA widening — if a decision was made to return capital to investors.

Disclosure: At the time of publishing, Steve Green owns shares in Templeton Global Growth Fund Limited.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Keep reading:

General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

© Rask Australia 2020

Join 20,000+ smart investors

Join the Rask Australia mailing and we’ll send you free investment reports, podcasts, expert insights, investing courses, ASX news and lots, lots more. All free. 

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian-owned.

feedback-icon

What can we do better? Please give us us some feedback :)

We care about your experience, please let us know if you have any suggestions to improve our site.