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Financial Planning > Trusts and Estates > Trust Planning

Bill Miller, Legendary Fund Manager, Back on Top

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No one knows the high and lows of the market (and life) better than Bill Miller. The famed fund manager’s Legg Mason Capital Management Value Trust (LMNVX) outperformed the S&P 500 for 15 years straight. But 2008 caused the deepest of cuts.

His value instincts meant he placed hefty bets on housing and now-defunct Wall Street names, and the fund sharply underperformed in 2006, 2007 and 2008. Calls for his firing were soon heard, but how, and with whom, do you replace Bill Miller?

Although he did eventually relinquish the reins of Value Trust to co-manager Sam Peters, he continued on with Legg Mason’s Opportunity Trust (LGOAX), and now, proving you can’t keep a good manager down, he’s once again back on top—at least according to The Wall Street Journal.

The paper reports that for the third straight quarter, Opportunity Trust finished first in The Wall Street Journal’s ranking of diversified U.S.-stock mutual funds with more than $50 million in assets and at least a three-year record.

Just how good is it? Its year-to-date annualized return as of July 10 is 35.21%; its 1-year annualized return is 64.34% and its 3-year annualized return is 14.22%. Whether he can sustain such returns long term, of course, is yet to be seen, but it’s quite a start.

Miller’s strategy is more of the same. The Journal notes “the fund has excelled in the past year using a common strategy: buying shares whose prices are significantly discounted by the market because of doubts about the businesses’ future. As the outlook for such companies improves, Miller says, ‘the gains come as they move to where they should have been, based on those fundamentals.’”

Best Buy Co. (BBY) and Netflix (NFLX) are two holdings largely responsible for the fund’s outperformance. Miller and co-manager Samantha McLemore had added both to their portfolio before those stocks began their runs.

“Gains from these shares and other outperformers left the $1.3 billion Legg Mason fund with a gain of 55.1% for the 12 months through June and a first-half return of 31.6%,” the paper says.

Check out Who Will Slay the Index-Investing Dragon?


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