Bill Miller

Bank stocks: Is the mania ending?

Jim Kim — Thu, 20 Nov 2008 13:33:34 -0500

Prince Alwaleed bin Talal is not deterred by Citi's nearly 90 percent stock slide. He plans to boost his stake to 5 percent from less than 4 percent, calling the bank's shares "dramatically undervalued." Of course that value approach has been exceedingly cruel to fund managers who were likewise convinced that the selling was overdone. That's how the likes of Bill Miller of Legg Mason got burned on Fannie Mae and other financial stocks.

John Roque, managing director and technical analyst at Natixis Bleichroeder, likens the bank stock swoon to other manias, suggesting there is still room for the group to decline. The S&P financial SPDR is down 70 percent from its peak. Other manias by comparison, Dutch Tulip Mania (1637), 90 percent peak-to trough decline; South Sea Co. (1720), 90 percent; Tokyo Real Estate (1989), 84 percent decline; and U.S. dotcoms (2000), 92 percent.

For more:
- here's a Reuters article on the prince
- here's a Tech Ticker article on bank stocks

Hits keep coming for Legg Mason

Jim Kim — Thu, 30 Oct 2008 15:03:43 -0400

The credit crunch has been cruel to more than a few money managers. Bill Miller, the head of the Legg Mason Value Trust fund, is at the top of the list. He never gave up on financial stocks, even as they continued to crater. The old value mantras just plain let him down. He kept loading up on agency stocks as they fell--and fell. And that has now forced the fund to pare staff. Bloomberg reports that as many as 50 of 147 employees may be shown the door. Miller's main fund is down about 50 percent this year, and investors have fled. That isn't horrible considering that the market is down about 40 percent. And other funds are certainly hurting. Fidelity may lay of 400. Janus is also slashing. The Bloomberg article says Miller is reviewing his investment style. "Reviewing"? If he doesn't tinker, something's wrong.

For more:
- here's the Bloomberg article
- here's a Boston Globe article on Fidelity

Bill Gross wins big on Fannie, Freddie

Jim Kim — Wed, 10 Sep 2008 21:21:56 -0400

The credit crunch has been cruel to some fund managers, notably Bill Miller of Legg Mason, who kept on buying as financial stocks kept on tanking. On the other hand, Bill Gross of on-fire Pimco, went long on Freddie and Fannie bonds, switching out of Treasuries and corporates. With the bailout by Uncle Sam, these bonds got a huge bump, which made Gross's big bet a winner. He's up $1.7 billion in his Pimco Total Return fund, reports the Financial Times. Gross was an early proponent of some sort of government action. He put his fund's money where his mouth was. His reputation is burnished. This is yet another in a string of savvy moves, which has boosted his fund 9.2 percent in the 12 months prior to Aug. 1.

For more:
- here's the FT article

Winners and losers in the Fannie, Freddie mess

Jim Kim — Mon, 08 Sep 2008 07:50:45 -0400

The news of the federal takeover of Fannie Mae and Freddie Mac spells really bad news for value investors--notably Bill Miller, who just couldn't believe that a beaten down stock wouldn't bounce back. He never learned his lessons, averaging in as financial stocks plummeted. Last week, when Freddie Mac stock was trading at about $5, he bought 30 million shares, according to the New York Times. All shareholders--and Fannie and Freddie ranked among the most widely held stocks--got burned, including employees who owned a lot of shares. The big winners are the shorts, the most vocal of which was hedge fund guy William Ackman. All in all, this is extraordinary news. As for Daniel Mudd, the departing head of Fannie, and Richard Syron, his counterpart at Freddie, they will make out well with severance packages in excess of $10 million; which will not make them popular.

For more:
- here's the article

Bill Miller bets on Freddie Mac

Jim Kim — Wed, 13 Aug 2008 08:14:08 -0400

It's fair to say that the financial crisis has been unkind to a lot of value-oriented fund managers. The mindset--by on valuation dips--has proved to be a loser's strategy. Anyone buying on the likes of Bear Stearns, Merrill Lynch and Lehman Brothers on the way down took some big hits. Miller was long on a whole lot of financial stocks, including Citigroup and Countrywide. At one point the Legg Mason Value Trust fund was down a whopping 40 percent. So what's the answer? How can he start a new 15-year streak? In true value fashion, Miller is loading up on Freddie Mac. Fortune reports his fund owns 80 million shares (12 percent of the total). That's up from 15 million shares at the end of last year. Some might call this desperation. We'll see.

For more:
- here's the Fortune article

Credit crisis crunches Bill Miller

Jim Kim — Wed, 23 Jul 2008 13:35:48 -0400

In the annals of investing, Bill Miller remains a big name. Recall that he beat the S&P 500 for 15 years in a row until last year. In 2007, his Legg Mason Value Trust fund fell nearly 7 percent against a 5 percent gain for the S&P 500. Many thought that was an aberration. But the credit crisis is dashing hopes of a return to historical form, Fortune reports. The Legg Mason Value Trust lost 20 percent in the first quarter; Miller was long on a whole lot of financial stocks, including Citigroup and Countrywide. He told shareholders the worst was over, but clearly he was wrong. As of now, the fund is down a staggering 40 percent. He's hardly alone. Fortune notes several big-name funds--such as Fidelity's Growth and Income fund the Oakmark Select fund--that have gotten tripped up on financial stocks.

For more:
- here's the article

Ready for 'write-ups' in the second quarter?

Thu, 15 May 2008 06:59:56 -0400

Breakingviews notes another reason to think that the worst of the credit crisis may have passed. Credit default swaps on collateralized debt obligations and leveraged loans have staged impressive rebounds. Prices have really rebounded. That raises the prospect of "write-ups" for the second quarter, which would certainly help offset expected weakness in other areas. Who'd have thought that just a few quarters ago. Still, there's no point getting too excited now. The article notes that the rebound has affected all securities; there are plenty of stinkers in plenty of portfolios. As well, the rebound may have been a bit of a dead-cat bounce, if you know what I mean. Still, there seem to plenty of distressed securities buyers out there. We'll see where this mini-rally leads.

For more:
- here's the Breakingviews article

New era for Bill Miller opening up?

Mon, 12 May 2008 06:59:58 -0400

We tend to think of Bill Miller as the guy who manages the $12 billion Legg Mason Value Trust, famous for having beat the S&P 500 for 15 years straight--a streak that ended recently. But as the New York Times points out, he's also chairman of Legg Mason Capital International, which is taking its lumps right now. It had large stakes of Yahoo and Countrywide. But these are the times when talent really shines. Some may think he's lost his touch. Or maybe he was due for a drought. But he's also thinking of shifting strategies in a way that would focus the fund on more stocks, or just a few dozen. He has his team scouring for opportunities, and you get the feeling that if Legg Mason Capital continues to lag, it won't be because of a lack of trying.

For more:
- here's the New York Times article

Mutual fund industry suffers

Tue, 29 Apr 2008 06:59:56 -0400

These are eye-popping numbers. Retail investors are fleeing equity funds en masse. Even the likes of American Funds and Vanguard saw their assets drop 6.6 percent and 4.3 percent respectively, according to the Financial Times. At places such as Fidelity, customers are shifting into money market funds and the like, but those are lower margin products. The company recently saw an assets drop of 10 percent. Obviously, the industry is suffering at the moment; the most recent round of earnings was nothing to write home about. Only Pimco managed to eek out a gain in long-term assets. Values may be turning attractive. One analyst is now bullish on Invesco.

For more:
- here's the Financial Times article

Bill Miller says worst is over

Mon, 28 Apr 2008 06:59:54 -0400

Bill Miller, the esteemed Legg Mason Value Trust fund manager, has declared the "panic phase" of the credit crunch over, reports MarketWatch. For him, personally, it has been an ugly trial; the Value Trust fund's performance over the past two years says it all (Recall that he beat the S&P 500 for 15 years, a streak that ended in 2006). His mutual fund tanked nearly 20 percent in the first quarter alone. However, he remained optimistic on the crisis. Even as the credit crunch worsened, he stuck with the likes of Citigroup and Countrywide. He thinks the Bear Stearns collapse marks the nadir. The wild card, he tells clients, is commodity prices and inflation. A spike really could create havoc.

For more:
- here's the MarketWatch article