Wednesday, April 9, 2008

Bill Miller is #596! Ouch.

How far the mighty have fallen ... Bill Miller is a mutual fund manager who had an incredible streak of 15 years in a row of beating the S&P 500 (this ended in 2006). He took large contrarian bets in concentrated fashion so hence why I have followed him with interest. I saw an article a few months ago about how he was buying financials, homebuilders, and the like and I just felt bad. Maybe over a 4-6 year time frame, but for the short term.... not so much (although I can at least understand the homebuilders because about 2 months ago they stopped going down no matter how bad the news was - but he was buying 2 years ago, not 2 months ago).

That said, I am not posting this to criticize him; I can only hope one day to have a mutual fund (hint hint) that other people can criticize me for my strange ideas.... but it has been a mighty fall, he only beat 4 of his 600 peers this last quarter in his mutual fund category. It just shows why it is not worth it to bottom fish too early in my book; when stocks do turn up from a very beaten down sector, if you miss the first 20-30% move, no big deal - if it's truly a new bull market there should be years of gains ahead...
  • Bill Miller's Legg Mason Value Trust posted the biggest first-quarter drop since opening 26 years ago on losses from longtime holdings such as Sprint Nextel Corp. and newer bets including Bear Stearns Cos.
  • The $12.2 billion fund fell 20 percent, trailing all but four of 660 rivals that buy stocks of companies with market values of more than $15 billion, according to data from Morningstar Inc. in Chicago.
  • Last year, Miller lost 6.7 percent, including dividends, compared with the average 6.2 percent gain among similar mutual funds.
  • The manager, whose 15-year record of beating the Standard & Poor's 500 Index came to an end in 2006, is lagging behind the U.S. benchmark for the third straight year. It's his longest slump since he joined Baltimore-based Legg Mason Inc. in 1981.
  • ``It's been an absolutely hideous quarter, but you cannot write him out,'' Russel Kinnel, director of fund research at Morningstar, said in an interview. ``He's had uncanny luck in previous years where everything worked out, but this time he's been where you just didn't want to be.''
  • Miller, 58, made his name by finding out-of-favor companies such as General Motors Corp. and Eastman Kodak Co., holding them for years and ringing up gains when other investors discovered them too. He also owns fewer stocks than competitors, making his strategy riskier. Value Trust had 51 stocks as of Dec. 31, about one-fourth the number held in similarly managed funds, Morningstar data show.
  • This year, just two of Miller's top 10 picks have had positive returns. One is New York-based JPMorgan Chase & Co., the third-largest U.S. bank by assets, which has gained 5.9 percent. The other is Yahoo! Inc., the Sunnyvale, California-based Internet-search company whose shares are up 20 percent in 2008 after a $44.6 billion unsolicited bid from Microsoft Corp.
  • Sprint, his seventh-largest holding, has dropped 50 percent as the Overland Park, Kansas-based mobile-phone company loses customers to rivals and cuts prices to lure them back. New York- based Bear Stearns, which accounted for 1.2 percent of fund assets, has plunged 88 percent. The fifth-largest U.S. securities firm agreed last month to be acquired by JPMorgan for $10 a share, down from a peak of $158.39 a year ago, to avert bankruptcy.
  • Miller put about 21 percent of assets in financial and housing-related stocks as of Dec. 31, two groups that have been pummeled by the worst real-estate slump since the 1930s. Communications and technology stocks, which accounted for about one-third of assets, have tumbled on concerns that earnings growth will slow.
  • Miller loaded up on financials last year after saying that the selloff among banks and brokers made them the cheapest since 1990. Miller had 19 percent of assets in financial stocks such as Bear Stearns, Citigroup Inc. and Merrill Lynch & Co. as of December, up from about 15 percent a year earlier.
  • Inc., the fund's biggest holding, has fallen 17 percent in 2008 after more than doubling in value last year. Miller started buying shares of Seattle-based Amazon, the biggest Internet retailer, in 1999. He pared his stake to 6.9 percent of assets as of year-end from 8.8 percent in September.
  • Miller's housing-related stocks, which he started buying about two years ago, include lender Countrywide Financial Corp. and homebuilders Pulte Homes Inc. and KB Home.
  • The fund manager has stayed out of energy stocks since a rally began in 2003, a decision Miller has rued as oil and natural-resources shares surged during the past four years.

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