The time to buy is when there's blood on the streets, the legendary financier Baron Rothschild declared more than a century ago. And with markets driven increasingly by momentum, thanks to the rise of computerized trading and virtual baskets of stocks, that axiom may now be truer then ever.

It's also the bedrock investment philosophy for Lauren Templeton (pictured) and Scott Philips, who run the Global Maximum Pessimism Fund and have a new book out detailing their view of markets ranging from agriculture to oil to stocks.

Templeton's investment method has familial roots. She's the niece of Sir John Templeton, the mutual fund magnate who pioneered international investing among other things. He advised to buy at times of maximum pessimism and sell into euphoria. And the fund, which beat the market last year, has racked up an impressive track record that bolster its views.

It's All About Valuation

Big-cap, high-quality U.S. stocks are currently engulfed in undue pessimism, Philips told DailyFinance in an interview. Companies like Wal-Mart (WMT) and Hewlett-Packard (HPQ) are trading at multiples far below their historic valuations despite seeing strong business.

Being able to rigorously value a company's business is a key criterion for the firm. It helps sidestep disasters that took place in the financial crisis -- when some banks loaded their balance sheets with assets that were nearly impossible to value – where extreme pessimism may have in fact been warranted.

It seems like everyone on Wall Street claims to be a contrarian, ironic as that is. But this fund located in Chattanooga, Tenn., is building a business on it. For more on Templeton's and Philips's investing strategy, see video:


Increase your money and finance knowledge from home

Introduction to Economic Indicators

Measure the performance of the economy.

View Course »

Income Investing

Grow your nest-egg.

View Course »

Add a Comment

*0 / 3000 Character Maximum

6 Comments

Filter by:
tewells7

Blood is hardly running in the streets with stocks generally at 18 times earnings with dividend yields at around 2% on average. I was a young broker in 1974 when you couldn't give away stocks like IBM at 9 times earnings yielding 6%! Richard Russell at Dow Theory Letters, who called the '70's decline, feels that we're going to see those kind of values again before the bear market is over. What is criminal is the Fed doing all they can to keep the bear mkt from running its course which just prolongs the inevitable. Cash and gold saved my clients in the '70's and is currently the proper choice once again.

August 16 2010 at 11:15 AM Report abuse +2 rate up rate down Reply
Gg

Beastly, dog eat dog world.

August 16 2010 at 9:23 AM Report abuse rate up rate down Reply
mmclean362

It's not just you - she's way hot!

August 14 2010 at 5:51 PM Report abuse -2 rate up rate down Reply
moonxoxo

Just me or is Lauren way hot?

August 14 2010 at 11:01 AM Report abuse -2 rate up rate down Reply
philozfir

Interesting interview. Most believe market is going to crash into a double-dip? This the time to buy, or is the real pessimism yet to come?

August 14 2010 at 10:54 AM Report abuse rate up rate down Reply
acktill

They better be real picky going into the second dip.

August 14 2010 at 10:16 AM Report abuse rate up rate down Reply