Bill Miller had one of the greatest investment streaks ever. For 15 consecutive years, running the Legg Mason Value Trust, he beat the S&P 500 by about five percentage points.
Miller joined Legg Mason in 1981 as an analyst. He took over sole management of the Legg Mason Value Trust in November 1990. It turned out to be a perfect time to invest.
His streak began the next year. Miller described the feat as “a large degree of luck, and maybe some modicum of skill. And I’d define skill as actually just surviving in markets over long periods of time without blowing yourself up.”
A big reason behind the streak was a shift in Miller’s philosophy. In the early 1990s, Miller realized that some companies might be statistically expensive but are bargains because of their superior long-term growth potential. The market recognizes some of that potential but fails to price all of it in. A few companies have a built-in advantage to outperform — already high expectations — for years.
A strategy tied to bargain companies with high growth potential led Miller to tech companies like Dell, AOL, and Amazon well before the Dotcom era peaked and at a time when most value funds avoided tech like the plague. Then he shifted gears again in late 1999 to more traditional value plays when tech valuations became unsustainable.
The ability to see things from a different perspective and the flexibility to adjust to wherever the best values lie sets Miller apart from other value investors. You can find it throughout his annual letters, commentary, and interviews. Continue Reading…
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