Merryn Talks Money• May 4, 2026• 28:16Interview

Temple Bar's Ian Lance on the Fund's Winning Formula | Merryn Talks Money

From Merryn Talks Money

Ian Lance•Manager, Temple Bar Investment Trust

Executive Summary

The Temple Bar Investment Trust, managed by Red Wheel since late 2020, has delivered exceptional returns (approx.
240%) by adhering to a strict value investing philosophy.
The strategy involves buying fundamentally sound but out-of-favor companies, often with controversy, at very low valuations (portfolio P/E is less than 10), and holding them for recovery.
Key contrarian holdings include energy giants like BP and Shell, which are benefiting from strategic shifts and geopolitical tailwinds, and advertising firm WPP, which is seen as a deep value turnaround story.
Despite being bullish on their portfolio, the manager expresses significant concern about broader market complacency, particularly in the US, which seems to be ignoring geopolitical risks like the shutdown of the Strait of Hormuz.

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Concerns Raised

Widespread market complacency, with the S&P 500 at all-time highs despite significant geopolitical risks.
The inability of central bank monetary policy to resolve supply-side inflationary shocks like the Strait of Hormuz closure.
The potential for a broad market downturn to negatively impact all assets, including undervalued ones.
The poor organizational structure and historical underperformance of key holding WPP.

Opportunities Identified

Deeply undervalued UK companies with turnaround potential, such as advertising group WPP.
Energy sector stocks (BP, Shell, US shale) benefiting from higher prices and company-specific catalysts like activist involvement.
Select consumer staples like Diageo, which have become attractive after recent earnings-related price declines.
Pockets of value in overseas markets, including US small/mid-cap energy and Korean banks.

Key Themes

Value Investing Philosophy

The core strategy is to buy companies at a significant discount to their long-term earnings potential, focusing on periods of market panic or negative sentiment. This involves looking 3-5 years ahead to a normalized earnings environment, rather than focusing on current, depressed profits.

This disciplined approach is presented as the primary driver of the trust's significant outperformance and offers a clear alternative to the recently challenged 'quality growth' investing style.

Contrarian Stock Selection

The fund actively seeks out companies that are unloved or surrounded by controversy, believing that bargains are only found where there is widespread pessimism. Holdings like WPP, UK banks post-financial crisis, and energy companies undergoing strategic U-turns exemplify this approach.

This highlights the psychological difficulty and potential rewards of going against market consensus, which is a key tenet of successful value investing.

Critique of 'Quality Growth' Investing

The manager argues that the 'quality growth' style, which often ignores valuation, was an artifact of a zero-interest-rate environment. As rates have normalized, many of these stocks have proven to be poor investments due to overvaluation and faltering growth, reinforcing the idea that price is a critical component of any investment.

This provides crucial context for the current market rotation and serves as a cautionary tale about investment styles that become detached from fundamental valuation principles.

Macroeconomic Complacency

A significant concern is raised about the disconnect between soaring equity markets, like the S&P 500 hitting new highs, and severe geopolitical risks, such as the shutdown of the Strait of Hormuz. The manager believes the market is wrongly assuming that central banks can solve supply-side shocks with monetary policy.

This identifies a major systemic risk for investors, suggesting that the popular 'buy the dip' strategy may fail in the current environment, as the underlying problems are not solvable by traditional central bank interventions.

Portfolio Discipline and Rotation

Despite the trust's strong performance, its overall valuation remains low. This is achieved by continuously rotating out of assets that have reached fair value and into new, undervalued opportunities, preventing the portfolio from becoming expensive and maintaining its potential for future returns.

This demonstrates a key operational discipline for value funds, ensuring that the strategy remains consistent and that past success does not lead to a deviation from the core philosophy.

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Topics

Value Investing Contrarian Investing Temple Bar Investment Trust UK Equities Portfolio Management Stock Selection WPP BP GSK Diageo Energy Sector Financials Sector Market Complacency Geopolitical Risk Strait of Hormuz S&P 500 Valuation Quality Growth

Processed May 4, 2026 yt-dlp + mlx-whisper + Gemini

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