The Streak Is In Danger
All fund managers fall on rough times at some point. This year, it's Legg Mason's Bill Miller that is in jeopardy of ending his streak of beating the S&P 500. In this news blurb today, the fund manager explains his recent losses:
BOSTON, Aug 2 (Reuters) - Legg Mason fund managerBill Miller, widely regarded as America's best stock picker, onWednesday said bets on Internet, home builder and managed-carestocks led to the fund's recent sharp losses.
"We had a dreadful second calendar quarter," Miller, whoseValue Trust Fund has beaten the benchmark Standard & Poor's 500index for 15 straight years, said in a letter to shareholders.
In the three months ended June 30, the $18 billion ValueTrust Fund lost 5.67 percent, Miller said. Bets on Amazon.com AMZN, Yahoo YHOO, UnitedHealth UNH, Aetna AET and certain home builders dragged down returns, he said.
Since January, the losses are even greater -- research firmMorningstar calculates the fund has lost 9.97 percent in thefirst seven months of the year. But Miller assured his investors that recent dramatic declines in some of his top holdings -- Amazon lost more than20 percent in one day last week -- have not yet prompted him to alter his long-term strategy.
"It is our willingness to own securities which other people regard as wrong which historically has been part of the long-term success of the fund," Miller wrote. "We are verypatient and will own a company as long as we are confident ofthe business value and of management's ability to execute thestrategies they have outlined."
In the last 15 years, the fund's average annual rate of return has been 15.03 percent, beating the S&P's 10.73 percent.
To beat the index, Miller said, the fund needs to lookdramatically different from the index, something that might be making some investors' stomachs churn right now.
"For those who are newer, or nervous, or whose psychological equilibrium is disturbed by non-linearity, some context might be helpful," Miller wrote, explaining his reasons for holding the Internet stocks and others.