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Bill Miller's Streak Might End. Horrors!

October 31, 2006

After beating the S&P 500 Index for a remarkable 15 consecutive years, Bill Miller of Legg Mason Value (LMVTX)is lagging the benchmark by nearly 11 percentage points for the year to date through Oct. 26, 2006. The extent to which the fund trails the S&P--which in turn has taken a toll on its longer-term comparisons with the benchmark--has some investors spooked. For example, after my colleague Russ Kinnel wrote a recent column that placed Miller among the 10 best current mutual fund managers, he received an e-mail from a reader who wrote that Miller, due to his bout of severe underperformance, is no longer among the industry's elite.

We beg to differ, of course. True, it does look increasingly likely that Miller's streak of beating the S&P will end this year, for although the fund has had strong fourth-quarter returns at times (due to holdings that thrive during the holidays, such as Amazon.com (AMZN) the current gap will be difficult to overcome in just two months. But we don't think the end of the streak would diminish the fund's attractiveness in the least.

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