Guru Bill Miller appeared on WealthTrack and talked about quite a few of his investments. When looking through his 13-F filing I immediately love his portfolio. Miller concentrates in his best ideas while holding a large amount of positions. He doesn’t mind industry concentration and is betting on lots of asset managers.
Miller runs both a mutual fund and a hedge fund. The deal with the hedge fund is that Miller put a small position in bitcoin inside that fund. However, bitcoin’s price exploded over 2017 and Miller found himself with 50% of the hedge fund allocated to bitcoin. To deal with that he spun off the bitcoin into a separate fund to allow the hedge fund investors to sell down Bitcoin as they saw fit. I want to dive into three of Miller’s holdings and highlight how he thinks about these:
1. Amazon
Miller believes Amazon (AMZN, Financial) is not expensive if you look at it creatively. It doesn’t generate a lot of GAAP earnings but Miller likens this to John Malone’s style of building a company. Malone is one of the best tax-minimizers in the history of corporate America. One way he did so is by investing in growth companies with the ability to invest capital at attractive rates.
Miller thinks it should double in three years. He also really likes that Amazon has a huge total addressable market. He compares the U.S. retail market to Global Ad spend to illustrate the difference of ceilings between Amazon and Facebook. Amazon’s runway dwarfs Facebook’s. $50 trillion market versus a $600 billion market. Finally, he reiterated Buffett who called Bezos an authentic business genius.
2. Miller on Bitcoin
Miller invested a small amount of his hedge funds its assets into bitcoin at around $300. Today it is about $12600. Yet he isn’t a raving crypto evangelist. Instead he says we shouldn’t invest more than we are comfortable losing in its entirety. He wouldn’t put more than 1% into bitcoin even if buying today. Miller views it as a safer investment at $12000 than it was back at $500. This goes contrary to the value investors mindset but it is likely true as the ecosystem around it improved and the chance it will become an important component to the global monetary mix is now much greater. Miller observes:
- An ETF may get launched.
- It is not owned widely.
- Could go to zero.
- It could also appreciate by multiples.
He emphasizes sizing a position small and that there’s a tremendous amount of speculation in the initial coin offering market (ICO).
3. Valeant Pharmaceuticals
Miller passed on Valeant Pharmaceuticals (VRX, Financial) at $50 and saw it go to $250. He didn’t like that very much until it collapsed. Currently it is their largest position. He started accumulating in the $30s but added to it as it fell. It is up 50% over 2017. Miller believes it is still worth at least double the current price which is in line with earlier remarks about Valeant I covered previously on GuruFocus. Valeant trades at about 2.2x free cash flow but also at 8.4x EV/EBITDA. It still has $27 billion worth of debt on a market cap of $7.5 billion and with only $3.5 billion worth of EBITDA. This distressed pharma its turnaround isn’t complete yet but it is moving in the right direction.
Disclosure: Author owns Bitcoin and VRX.
