Most everyone is familiar with Alfred Hitchcock’s classic film Vertigo. These days, odds are good if you saw the title on a theater marquee, you might think it’s a haunting tale about investing. After all, an out-of-balance market that surges one day and retreats the next can leave one feeling more than a little unsteady.
As a co-portfolio manager for Franklin Balanced Fund with Ed Perks, Shawn Lyons spends a good deal of time thinking about how to achieve equilibrium between stocks and bonds and how to help cushion investments during a downturn while still making the most of competitive gains potential during market rallies:
“The Franklin Balanced strategy hinges on balancing the total return potential and appreciation potential of the stock component of the portfolio with the income-generating potential of the fixed-income component. We’re benchmarked against both the S&P 500 Index and the Barclays Capital U.S. Aggregate Index, so it’s a different blend of securities.”
Every now and then we get an opportunity to have a fireside chat of sorts with the people behind the Portfolio Manager title. A few months ago we met with Lisa Myers of Templeton Global Equity Group, and this week we had a similar up-close and personal chat with Peter Langerman, chairman, president, and CEO of Franklin Templeton’s Mutual Series, the New Jersey-based deep value investing group.
On His Pre-Investment Life
“I had a variety of interesting summer jobs when I was in college. Among them, I worked on a ranch one summer in Montana. It was a pretty solitary existence but it taught me a lot. I had a bunch of responsibilities which I had no experience doing prior to that time. I learned a lot about individual responsibility. Some of these lessons shaped how I do things even today.”
Almost every market move these days seems to be tied to the latest headline coming from Europe. And the U.S. political deadlock on deficit reduction, high unemployment and fear of a recession hiding under the bed are certainly not helping investor morale. But don’t throw in the towel just yet. While the ongoing turbulence in the markets has investors feeling more than a little edgy, the story of robust and resilient growth in emerging markets seems cause for optimism.
Emerging markets have been widely hailed as the next great hope, so we at Beyond Bulls & Bears decided now is a good time to reflect on historical comments and share new insights from our two emerging market luminaries, Templeton Emerging Markets Group’s Dr. Mark Mobius and Franklin Templeton Fixed Income Group’s Dr. Michael Hasenstab, who are co-portfolio managers of the recently launched Templeton Emerging Markets Balanced Fund, overseeing the fund’s equity and fixed income investments, respectively.
At a time when many believe government bond yields are hitting the proverbial rock bottom and stock market volatility is more than many can stomach, where can an income-oriented investor turn? In a word: dividends.
In a low growth climate, high-quality dividend-paying stocks offer distinct attributes that make them a compelling antidote for wary investors. Franklin Equity Income Fund Portfolio Manager Alan Muschott explains how these attributes can help dividend-paying stocks outperform in grueling markets and what he looks for when picking companies:
“Nobody says they invest in low-quality stocks, right? Everybody says they invest in high-quality stocks. So what we really want to do is elaborate on what that means to us. The strength of what we do is in our research team, and what most of their time is spent doing is really determining the quality of the company by looking at it from three different points of view.”
With political impasse hanging over deficit reduction efforts in the U.S. and Europe’s sovereign debt crisis continuing to cast its long shadow over markets at home and abroad, it would seem that “debt” has joined the ranks of four-letter words not used in polite company. Given that repute, investors might be surprised to hear Franklin Strategic Income Fund Portfolio Manager Eric Takaha cast debt in a positive light:
“First of all, I’d say debt, used prudently, can actually be a positive, whether it’s for an economy or a corporation. It allows them to invest in their businesses and grow over time. When our investment team thinks about debt, whether it’s for a sovereign country or an individual corporation, we think about how that entity approaches use of debt, if they are doing so in a prudent fashion, or if they are getting overly aggressive.”