Bill Miller is among the value-oriented mutual fund managers getting attention from the financial press of late for their recent comebacks.
Miller is featured on this week's cover of Barron's under the headline "He's Back!"
Miller is featured on this week's cover of Barron's under the headline "He's Back!"
For many years Miller, the manager of Legg Mason Value Trust, was a media superstar for his amazing 15-year streak beating the S&P 500 index. But Value Trust lagged the S&P 500 in 2006, 2007 and 2008, and last year Miller fell hard from grace with losing bets on financial stocks including Lehman Brothers, Bear Stearns and Fannie Mae. Miller's fund had lost 72 percent of its value in the 18 months concluding with the March market lows, wiping out a decade of gains.
Now Miller is again back on top, Barron's notes. Value Trust is up 37.5 percent on the year, making it one of the top-performing funds in its peer group. And Miller notes that shareholders won't face any capital gains taxes for a while due to losses realized during the fall from grace.
Miller admits in the Barron's interview that he misread the nature of the recent financial crisis as a liquidity issue rather than one primarily caused by heaps of bad debt. He says he's made adjustments to the way Value Trust evaluates risk and constructs its portfolio. Among his current favorite picks are healthcare stocks Aetna, United Health and Aflac, as well as technology-focused eBay, IBM and Hewlett-Packard. Global power company AES is the fund's biggest holding.
Now Miller is again back on top, Barron's notes. Value Trust is up 37.5 percent on the year, making it one of the top-performing funds in its peer group. And Miller notes that shareholders won't face any capital gains taxes for a while due to losses realized during the fall from grace.
Miller admits in the Barron's interview that he misread the nature of the recent financial crisis as a liquidity issue rather than one primarily caused by heaps of bad debt. He says he's made adjustments to the way Value Trust evaluates risk and constructs its portfolio. Among his current favorite picks are healthcare stocks Aetna, United Health and Aflac, as well as technology-focused eBay, IBM and Hewlett-Packard. Global power company AES is the fund's biggest holding.
Miller told Barron's that he sees "high-quality mega-caps" outperforming over the next 5-10 years. He says the stocks that have outperformed of late represent a "dash-to-trash" and thinks bargains abound among the best-in-class names.
Many investors fled Miller's fund in the wake of the massive losses. Its assets are down from $20 billion at the peak to $4.7 billion now. But Barron's says Value Trust is "worth revisiting."
Miller isn't the only value guru attracting attention for comebacks this year. Fortune magazine's Oct. 12 edition includes a piece titled "The Comeback Kids" that features five mutual funds that have bounced back. Among the names: Marty Whitman's Third Avenue Value, Mason Hawkins and Staley Cates' Longleaf Partners, and Bruce Berkowitz's Fairholme. Both Longleaf and Fairholme are now betting on Berkshire Hathaway, with Berkowitz telling Fortune that he thinks Warren Buffett will continue to use Berkshire's cash horde to take advantage of "cracks in the market."
Miller isn't the only value guru attracting attention for comebacks this year. Fortune magazine's Oct. 12 edition includes a piece titled "The Comeback Kids" that features five mutual funds that have bounced back. Among the names: Marty Whitman's Third Avenue Value, Mason Hawkins and Staley Cates' Longleaf Partners, and Bruce Berkowitz's Fairholme. Both Longleaf and Fairholme are now betting on Berkshire Hathaway, with Berkowitz telling Fortune that he thinks Warren Buffett will continue to use Berkshire's cash horde to take advantage of "cracks in the market."
Speaking of Fairholme, Berkowitz said during a Sept. 30 Webcast that FAIRX has now hit $10 billion in assets but has no immediate plans to close. The firm also mentioned that it was thinking about starting an income fund, which would utilize the research being done for the fixed-asset portion of Fairholme's holdings. Fairholme is now soliciting advice from investors on whether to start the second fund.
Disclosure: Long FAIRX and BRKB.
