Excerpts from Bill Miller’s Latest Letter

As usual, quality insights from the manager of Legg Mason Value Trust in his latest shareholder letter dated February 10, 2008. In my view, a couple are definitely worth posting:

On the constant chatter of possible recession:

Investors seem to be obsessed just now over the question of whether we will go into recession or not, a particularly pointless inquiry. The stocks that perform poorly entering a recession are already trading at recession levels. If we go into recession, we will come out of it. In any case, we have had only two recessions in the past 25 years, and they totaled 17 months. As long-term investors, we position portfolios for the 95% of the time the economy is growing, not the unforecastable 5% when it is not.

On Microsoft’s offer for Yahoo:

The 60% premium MSFT offered for YHOO highlights what we believe are the significant opportunities present in our portfolios. Clients and shareholders are understandably disappointed when the performance of their portfolio does not keep pace with the broader market. But the price of a publicly traded security is one thing, and its value is something else. Price is a function of short-term supply and demand characteristics, which are heavily influenced by the most recent news and results. Value is the present value of the future cash flows of the business, and that is what we focus on.”

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One Thought on “Excerpts from Bill Miller’s Latest Letter

  1. Buffett used to tell a story more or less like this: When you have thousands of people flipping coins, a few of them will flip heads many times in a row. And they will be seen as the masters in coin flipping, will write books on the subject, etc.
    To me Bill Miller is the best example of someone who did it 15 years in a row then ran out of luck. How can he explain buying and holding stocks like Yahoo, Amazon, Eastman Kodak (which will die sooner or later, it’s only a matter of time), etc.? His flagship fund is having big outflows. People are realizing that perhaps there was indeed less skills than luck involved.
    By the way, he got lucky again on Yahoo, a company that was on the way to become a footnote in Internet history until it received a bid from Microsoft.

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