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Bill Miller

Bill Miller was born in 1950 in Laurinburg, North Carolina. He attended Washington & Lee University and graduated in 1972 with an economics degree. After graduating, Miller got a job at the J.E. Baker Co and moved on to become its treasurer. In 1981 he went to work for Legg Mason and in 2007 he held the positions of chief investment officer and chairman at Legg Mason Capital Management. He also manages the portfolio of the Legg Mason Value Trust (LMVTX). Miller has achieved excellent results managing this fund. From 1991 until 2005 the total return earned by the fund consistently outperformed the S&P 500 index. In 1990 the fund was valued at $750 million and in 2006 it had grown to $20 billion.

Miller’s investment style has been described as iconoclastic. The managing editor of Fortune Magazine, Andy Serwer, said "You simply can't do what he's done in the supremely competitive, ultra-efficient world of stock picking by following the pack …The fact is that Miller has spent decades studying freethinking overachievers, and along the way he's become one himself."

Miller describes himself as a value investor; however his view of this investing style is a little different from the traditional definition. Miller says that any stock can be considered a value stock as long as it is being traded for a lower price than its intrinsic value. This is the principle upon which his successful investing with the Legg Mason Value Trust fund was based. Miller attributes his success to two factors: intensive analysis of securities and good portfolio construction.

Miller explained the way that these two factors work in his fourth-quarter (2006) letter to shareholders of the Legg Mason Value Trust as follows:

Value investing means really asking what are the best values, and not assuming that because something looks expensive that it is, or assuming that because a stock is down in price and trades at low multiples that it is a bargain … Sometimes growth is cheap and value expensive. . . . The question is not growth or value, but where is the best value … We construct portfolios by using ‘factor diversification.' . . . We own a mix of companies whose fundamental valuation factors differ. We have high P/E and low P/E, high price-to-book and low-price-to-book. Most investors tend to be relatively undiversified with respect to these valuation factors, with traditional value investors clustered in low valuations, and growth investors in high valuations … It was in the mid-1990s that we began to create portfolios that had greater factor diversification, which became our strength …We own low PE and we own high PE, but we own them for the same reason: we think they are mispriced. We differ from many value investors in being willing to analyze stocks that look expensive to see if they really are. Most, in fact, are, but some are not. To the extent we get that right, we will benefit shareholders and clients.”

Miller has been quoted as saying, “The market does reflect the available information, as the professors tell us. But just as the funhouse mirrors don't always accurately reflect your weight, the markets don't always accurately reflect that information. Usually they are too pessimistic when it's bad and too optimistic when it's good." He describes the common mistakes that investors make when he said, "What we try to do is take advantage of errors others make, usually because they are too short-term oriented, or they react to dramatic events, or they overestimate the impact of events, and so on."

Miller currently holds the position of chairman of the board of trustees of the Santa Fe Institute. This is an organization that conducts multidisciplinary research into complex systems theory.

Publications about Bill Miller include:

The Man Who Beats the S&P: Investing with Bill Miller

About the author

Mark McCracken

Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".

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