Attractive, Long-Term Potential

Gary P. Motyl, CFA^®
Chief Investment Officer,
Templeton Global Equity Group

We believe that global markets are still undervalued and offer attractive potential over the longer term. While markets have come very far very quickly, we continue to find a fair number of stocks with compelling valuations that we believe may perform well over the next one, three and five years and fit Templeton's global equity strategy.

We are currently finding attractively valued stocks in the United States, as well as in Europe. Most of the European companies that we consider for our Templeton global equity strategy have a global outlook, as opposed to focusing solely on the European community. The Templeton Global Equity Group also invests in a fairly eclectic mix of emerging market names, with holdings in countries such as South Korea, Taiwan, China and India.

OUR APPROACH

When seeking value, we look for misconceptions that have driven stock prices down, such as a firm's plunge into near-term difficulties that we believe are temporary in nature and should correct over time. Times of crisis can cause extreme volatility as these fears and misconceptions become exaggerated. The typical reaction is to sell, and panic selling creates attractive opportunities to purchase stocks at bargain levels. Investing into such short-term pessimism and patiently waiting for the longer-term fundamentals to evolve provides the potential to capture the upside that only comes with purchasing stocks at depressed prices.

SECTORS OF INTEREST

Regardless of sector, the Templeton Global Equity Group's strategy is to identify a company's potential over a five-year time horizon, trying to capture longer-term trends. This allows us to value companies based on their prospects over a full business cycle rather than at a temporary peak or trough.

Technology

As value-oriented investors, we do not often have the chance to invest heavily in technology stocks, but valuations in the sector currently look very appealing. This group has underperformed the markets over the last 10 years, and in our opinion, many technology companies offer attractive longer-term potential.

Health Care

We believe most investors are not focusing on the potential for pharmaceutical companies, particularly in Europe, to tap into emerging markets. As emerging economies expand, their governments may try to improve health care delivery systems. We also believe the market is overlooking the high free-cash-flow yields, increasing dividend yields, restructuring potential and favorable demographics that are likely to drive growth among select pharmaceutical companies.

Telecommunications

We believe telecoms still offer very good value, particularly on a total return basis. Select companies in the sector have been trading at significantly discounted valuations while generating high free-cash flow with strong long-term earnings potential. Additionally, many have geographically diverse revenue streams that can insulate them somewhat from worsening economies in the developed world while providing exposure to the faster-growing consumer base in emerging markets.

Please click for more information on the following funds:
FTIF - Templeton Global (Euro) Fund
FTIF - Templeton Global Equity Income Fund
FTIF - Templeton Global Fund
FTIF - Templeton Global Smaller Companies Fund
FTIF - Templeton Growth (EURO) Fund

Posted: 21 October 2009