As mentioned on the Psy-Fi Blog earlier this week, one of the reasons John Templeton was so successful is because he looked at the numbers when making decisions about investments.

Author William Proctor describes Templeton’s quantitative approach to investing in his 1982 book, The Templeton Touch:

“When I began, no other security analyst I knew was using quantitative analysis,” he recalls. “This method had a lot to do with the fact that we were able to produce such a good performance record for our annual mutual funds. Quantitative analysis is in widespread use today: In a world of about twenty thousand professional security analysts, I think more than 10 percent now use this approach. But we were one of the first.”

 “In this way, because you’ve got the arithmetic, you’ve got quantities,” Templeton explains. “You measure the management by quantities rather than by qualities. So arithmetic does two things for you: It enables you to take the different aspects of a corporation and combine them in arithmetic terms in order to arrive at a valuation estimate for that corporation. And secondly, stressing numbers enables you to compare different types of corporations by what they score in terms of their arithmetic total.”

Quantitative analysis has been perhaps the single most important selling point for Templeton’s approach to stock selection–aside from the fact that he has had such a brilliant track record for more than two decades. “I’ve made a career of quantitative analysis,” he said. “We built our list of clients by showing them the advantages of quantitative analysis and explaining it to them. We showed them what we were doing that was different from other investment counselors who were using qualitative analysis. Our quantitative analysis turned out to be a good way to attract clients, and it was also a good way to produce a superior record.”