Miller was born in North Carolina in 1950. After studying economics at Washington and Lee University, he worked in military intelligence and then joined fund manager Legg Mason as their director of research in 1981. A year later he would become the co-manager of the Legg Mason Capital Value Trust. He would eventually take over sole management in 1991 and run it until 2011. Since 1999 he has been the chairman and main manager for the Legg Mason Opportunity Trust.
What was his strategy?
Mason considered himself to be a pure value manager, in that he aimed to buy companies that were trading at a discount to what he considered to be their fair value. His approach was a blend of "growth at a reasonable price" and value strategies he was happy to hold stocks that many value investors would consider expensive if he thought the high price was justified.
Did this work?
Between 1991 and 2005 Legg Mason Capital Value Trust beat the market for 15 straight years. Its subsequent performance wasn't so good, as his portfolio, which was heavily exposed to financial stocks, fell by nearly 70% during 2007-9 and was still well below its peak by the time Miller left in 2011. However, this still meant that it outperformed the market by an average of around 1% after fees.
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What was his best trade?
A lot of Miller's success was down to his investment in the technology sector in the 1990s. While value investors shunned this area because they felt the companies had very high price/earnings ratios, and they were too unpredictable, Miller thought they had a profitable future. His most prominent coup was buying $20m worth of shares in the computer manufacturer Dell in early 1996 when it was trading at less than ten times its earnings, at just over $1. He would sell four years later when the stock was $50, with a market cap of just under $1bn.
What can we learn from him?
Miller's overall success is further evidence that a "growth at a reasonable price" strategy can work consistently. His success with technology companies during the dotcom boom also suggests that it is possible to find value in any sector if you look hard enough. However, his problems during the financial crisis show the downside of putting too much money in one particular sector, as well as demonstrating that sometimes a sector can be cheap for a good reason.
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