An event or development that causes the market to revalue an asset — the mechanism by which the gap between price and intrinsic value closes.
Deeper Explanation
A contrarian investment without a catalyst can remain undervalued indefinitely — the dreaded "value trap" scenario. Templeton always searched for the mechanism that would cause the market to wake up to the value he had identified: a management change, a business recovery, a new product cycle, a regulatory change, or simple passage of time restoring normalised earnings. The catalyst does not need to be identifiable at the time of purchase — it just needs to be plausible. The more specific and near-term the catalyst, the more confidence the investor can have in timing. The more speculative the catalyst, the larger the required margin of safety.
Continue Learning
Go deeper into the Contrarian school — frameworks, case studies, and decision systems.