Bill Miller, the man once dubbed ‘fund manager of the decade', has just endured his worst quarter relative to the market in his entire 25-year career.
Miller saw his Legg Mason Value trust vehicle drop 14.9% in the first two months of 2008, with more losses recorded in March.
But while Miller and the team apologised to investors for the recent barren spell, he remains confident he can deliver strong returns in the near future, even if a “recession appears to be underway”.
Speaking at the Legg Mason investment conference yesterday, Miller pointed to a strong track record of fighting back when the chips are down.
“My previous two worst quarters (prior to Q1 2008) were in 1987 and 1990,” Miller says.
“But in 1998 I had the best performing fund, and in 1991 I began 15 straight years of outperformance.
“If we have a pickup in the market, we are positioned for strong outperformance in that market.”
Miller admitted to being one of the largest holders of decimated investment bank Bear Stearns, but says other names have also underperformed.
“Many people point out Bear Stearns, but we were hit harder on Amazon – our largest holding – which has fallen the last year,” he says. “But this was a stock that was up 100% in 2006”.
Another reason for Miller’s recent poor spell can be explained by his staunch support for the financials sector, where he is currently overweight. He pointed to the likes of Merrill Lynch and Wachovia, two names high on the list of credit crunch write-downs, as “the next place to be”.
“I was speaking at a conference on the Friday of the Bear Stearns announcement… and only two people in the room were overweight financials,” he says.
“A year from now, I would say half to three quarters will be.
“If you need a hedge, I would be long US financials and short 10 year treasuries.”
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