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John Templeton is one of the most famed investors of all time.
This is a guy who in 1939 bought $100 worth of all stocks traded under $1, and by 1943 he had four times his money. He’s up there with the greats.
His strategies, and the way he built his wealth, were so brilliant that I think there are a lot of key values and structures that we could apply to our farming operation to help us be more consistent, profitable, and smart.
For starters, his key values were hard work, punctuality, and commitment, which are obviously useful in any business context.
Beyond that, here are 7 strategies you can use to farm like John Templeton.
1) Buy depressed assets
This strategy is exactly what Templeton did in the example of 1939 above. The stocks he bought under $1 were depressed assets.
Farming is depressed right now, too. This year may be the best time to buy farm assets. At the end of the year, there are probably going to be some auctions that are worth going to, especially if you’ve got equipment that needs upgrading.
You can see the fear in agriculture right now: people are concerned about commodity prices, and there’s going to be a lot of bankruptcy with people who are overextended and a lot of auctions where there just aren’t buyers. If you’re wanting to buy a little equipment or land, and you’re not yourself overextended, this is a great opportunity.
2) Avoid the noise
After living in New York City, John Templeton ran his investment fund from his home in the Bahamas, far away from the noise of Wall Street. He would spend hours on the beach every day reading through investment reports.
The further he got away from the noise and the day-to-day emotions in the thick of things, the more successful he became. His investment performance just about quintupled when he moved to the Bahamas.
It’s the same thing with a farmer: when you’re on the frontlines, you can’t make good choices. There’s too much information.
Try to take regular trips. Go to the lake on the weekend; spend some time in a quiet wood somewhere.
I try to leave the state for five days every month, resetting my brain. I call it “sharpening the saw.” It’s just like exercise, except mental. When I first started farming, I’d drive to California twice a year, a 25-30 hour drive, and in the car I solved most of my business challenges.
Avoid the noise, so you’ll know what to do when you’re back in it.
3) Don’t do what everyone else is doing
Templeton said that if he wanted to outperform all the other investment managers, he couldn’t read or do the same things they were doing.
You’re not going to outperform the herd if you’re traveling with it. In fact, you can use the advice from the herd as a contrarian indicator.
In recent years, when you look at the crazy herd mentality that put a lot of farmers out of business, it’s clear that it didn’t work. Fortunately, I was too new, dumb, and poor to make really bad decisions when I started out farming. I wasn’t haven’t good yields because I was just breaking up land when the prices were good, but it allowed me to cash flow that freshly broken sod.
If you could go back and recreate what happened, what would you do as a farmer? You definitely wouldn’t be going out locking yourself into several years of high-cash rent. You wouldn’t be buying high-priced land or upgrading all your machinery at once just to avoid some taxes.
We need to rewrite our own histories and say, “This is what I would’ve done.” The opportunity will come again, and you can handle things differently this time around.
4) Go where others fear going
People would ask Templeton where the outlook for opportunities was good. According to him that was the wrong question: instead, you must look where the outlook is miserable to find good investments.
Think about when oil got down to $30 a barrel and everybody freaked out. What if you’d bought a ton of oil stocks instead? You’d be sitting pretty.
It was the same case with silver recently, and my best-performing stock this past year was in silver. When you can buy a company for less that what their assets are worth, you’ve got to do it.
5) Look to the future—not the present—when valuing assets
Whenever John would look at buying a company, he would have his analysts forecast the price-to-earnings ratio five years down the road. Think about oil: if it’s $30 today, and we project it to be $50 in five years, the company will be worth a whole lot of money.
It’s the same with agriculture. Set yourself up so that five years down the line you’re in a great position when times are tough. That’s the kind of forward thinking that will set you apart.
6) Break complex things down into things that are simple
When people asked Templeton what his approach was, he would simply say, “Buy cheap stocks.” Not cheap in regard to great value, just cheap depressed stocks.
He’d figure out which were the good companies that were just in an industry that was hated. When the whole sectors go down, good companies get devalued. You can pick them up for pennies on the dollar.
For the complexity of grain marketing, Cash Cow Farmer has a 5-step process for building a bulletproof grain marketing plan for our customers. Breaking it down into a process makes it way easier than trying to decide how you’re going to sell your grain at the top of the market and forecast the futures. If you don’t break marketing down, it becomes a behemoth that’s impossible to take down.
7) Delegate weakness
Most investment funds hire analysts and manage the business themselves. Templeton loved the analytical work, so he would outsource the management and just focus on picking winners.
On the farm, if you’re good at operating machinery and growing commodities in the worst possible environment, that’s where you should focus your effort—not on business strategy or marketing if that’s not what you like to do. A lot of farmers love the work of producing grain, but sell it at inconvenient times and limit their profitability or even sell for a loss at times.
Bonus: Time management
Templeton always carried books and papers with him, so that if he had any extra time he would have something productive to do.
While you’re sitting in line at Walmart, waiting to check out, there’s no reason you can’t check the markets, reach out to your team, or read an article about farming. Or while you’re sitting in line at the elevator, listen to podcasts or a book on tape.
Anything to be productive. That’s the “John Templeton Way.”
Need something to listen to while you’re waiting around at the elevator? Check out The Cash Cow Farmer Podcast, where we give advice every week on running your farm operation like a Fortune 500 company.
If you don’t use iTunes, you can listen to it here.