Bill Miller Writes About the End of “The Streak”

If you have read about my investment philosophy on you will see that I refer to Bill Miller (manager of Legg Mason Value Trust) in comparing my value strategy to others that are more well known than myself. Miller looks at the market differently than most, and I use many of the same techniques when I manage money, so he is an excellent person to read about if you want to get a better idea of what Peridot Capital is all about.

A logical question would be “If Bill Miller is so good, why should I invest with you instead of him?” If you look at Miller’s performance in recent years, it pales in comparison with his longer term track record. The reason is quite simple; as Miller as gotten more and more publicity, money has poured into his fund.

He now manages billions of dollars, and as a result, is very limited in the stocks he can buy for his fund. Since Miller prefers very concentrated portfolios, he is now limited to investing in very big companies. With a smaller universe from which to choose his investments, Miller’s margin of outperformance is narrowing with each passing year (see chart).

As you may have heard, 2006 was the first year since Miller took over the fund in 1990 that Legg Mason Value Trust failed to beat the S&P 500 index. Although “The Streak” is now over (it is the longest streak by a mutual fund on record), Miller’s overall investment philosophies remain very relevant. For managers who don’t have the task of investing tens of billions of dollars, continuing to invest according to a contrarian investment strategy will prove very profitable.

Fortunately, for those who aren’t familiar with Bill Miller, he writes quarterly letters that are made available to the public, regardless of whether you own shares of his fund or not. In his latest, Miller discusses the end of “The Streak” and other important value investing concepts.

While I would no longer recommend investors buy shares in his fund for the reasons mentioned, I definitely suggest that those interested in contrarian value investing in general, or Peridot Capital more specifically, should read his quarterly letters. You may access his latest letter here.

Enjoy this post? Subscribe and never miss another one: RSS | Email | Twitter

3 Thoughts on “Bill Miller Writes About the End of “The Streak”

  1. Financeguide101 on February 8, 2007 at 3:42 AM said:

    Hello Chad Brand,

    This is a great place to visit everyday to know about Stock market information, thank you for sharing your helpful information.


    Finance Guide 101

    P.S. I have commented on your blog few days ago and seems like it didn’t get your approve ..I hope this time it will .

  2. Chad Brand on February 8, 2007 at 6:57 AM said:

    Thanks, Daniel. Not sure why your prior comment didn’t go through. Comments don’t require approval though, so unless they are spam related they will post right away.

  3. Financeguide101 on March 2, 2007 at 7:00 AM said:

    Hello Chad Brand,

    Thank you for considering my comment and posting it.

    Finance Guide 101

Post Navigation