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You guys follow Bill Miller? Legg Mason Value guy

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You guys follow Bill Miller? Legg Mason Value guy

Old 11-02-2007, 08:56 AM
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Default You guys follow Bill Miller? Legg Mason Value guy

One of the enduring features of the findings in behavioral psychology as it applies to finance, a subject I have discussed many times over the years, is the almost complete inability of those who are aware of them to actually apply them. You can attend Richard Zeckhauser's seminars at Harvard, read lots of articles and case studies, be reminded of how recency bias, or anchoring, or the representative fallacy, or myopic loss aversion impair clear thinking and skew decision making, and still fall prey to them and others of their ilk the moment you are confronted with real world situations.

The recent precipitous decline in financial stocks, especially those related to housing, which sent Countrywide Financial (CFC) to $12 last week, and led to 20 to 30% drops in financial guarantors in a day or so -- after they had already dropped between 25 and 50% this year -- is a case in point. After falling 20% in a only a few days on no news, and this after being down 50% for the year, CFC rallied over 30% in one day once they reported their results and indicated they would be profitable for the 4th quarter and expect to earn a reasonable return on equity of 10-15% for all of 2008. The price action on both sides was driven by emotion -- first fear, then relief -- and was hardly the result of a careful analysis of Countrywide's long term business value. That, by the way, we think is in the $40's compared to its current price of about $14-15.

This is not unusual. Warren Buffett has often noted how any knowledgeable analyst would have pegged the value of the Washington Post at about 5x what it traded at in the 1974 bear market, yet no one wanted it at that price. The 2002 bear market saw some similarly amazing prices. AES traded under $1. It will generate over $1 of free cash flow this year and is up 20 times from the lows of 2002. Yet fear set its price, as it did those of Nextel, Tyco, Corning, Amazon, and a host of other companies at that time.

Today fear dominates the pricing of housing stocks, of mortgage related securities, of financials, and of many consumer stocks. Confidence and optimism underlay the pricing of energy, materials, industrials, and non-US stocks, especially those of emerging markets, and China in particular.

I am reminded once again of the quote that sits in the front of Ben Graham's Security Analysis, from Horace's Ars Poetica: "Many shall be restored that now are fallen and many shall fall that now are in honor." (The quote does not say "all" by the way, just "many").

In Value Trust, we have been taking advantage of the market's current turmoil to make adjustments as the market misprices some securities in relation to others. Here is what you can expect: the fund will become more of what it already is, large capitalization US, as we systematically reduce our mid-cap names in favor of those with larger market values. As I noted elsewhere, I think large-cap US is the cheapest part of the equity market and so we will have more of those names. We will also extend exposure into some sectors from which we were previously absent. Inter industry valuations are pretty homogeneous and so concentration pays less than it used to. In other words, we will own more stocks, and in new industries. We will still be quite concentrated compared to the average mutual fund, just less than we have been previously.

We will likely reduce the weightings of many of our top 10 holdings. They will still be among our largest holdings, we will just have less of them. This is being done to reduce risk in the over-all portfolio, and to fund some of the new names we are buying.

This is the first time since 1990 we have had two calendar years behind the S&P 500. Perhaps not surprisingly, that was also a time of panic due to a housing market recession, soaring oil prices, banks and financials collapsing. We were able to take advantage of the values then offered to begin a pretty good period of excess returns.

While the past may not repeat itself, it does often rhyme, as Mark Twain once said. The chapters to come may be different, but the verses are likely to sound the same.

Bill Miller

November 1, 2007


When I read this, and I think of how fortunate/smart some of you were to invest in RIMM and APPL and GOOG and AMZN, while I bought Ford (cough. no worries on my account... I have been trading this market all autumn in and out...), and hope you will heed the quote from the above: I am reminded once again of the quote that sits in the front of Ben Graham's Security Analysis, from Horace's Ars Poetica: "Many shall be restored that now are fallen and many shall fall that now are in honor."
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Old 11-02-2007, 10:49 AM
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Default Re: You guys follow Bill Miller? Legg Mason Value guy

Miller's track record speaks for itself. He's beaten the S&P with his value philosophy for something like a decade straight.

Seeking to buy what others are selling is tough. You feel like you're walking into the abyss while everyone flees, but on the edges of the abyss, there are opportunities to make more than you would if you simply followed the herd. It's not for the faint of heart, and I wish I was better at it.

Take gold stocks 5-10 years ago. No one wanted them. Gold? How 19th and early 20th century? But if you bought near those bottoms and watched them climb, you made a nice chunk for yourself (my father in-law's Glacier Bay is jokingly referred to as ex-AU - or used to be gold -- since the proceeds from prudent investing helped him buy it.)

Sal, thanks for putting this out there. A good reminder.
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Old 11-02-2007, 12:54 PM
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Default Re: You guys follow Bill Miller? Legg Mason Value guy

Miller is a stud and I only wish I'd heard of him more recently than a year or so ago. And as to being smart about buying Apple and Garmin (they are my 2 shining stars among the majority of malingerers and pisspoor performers in my "portfolio) my only analysis went like this: "Geez, almost every guy who works for me has an iPod, I think I'll take a flyer. Garmin makes alot of affordable gps systems, I bet they'll sell alot." Sometimes it's better to be lucky than good...

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Old 11-02-2007, 01:01 PM
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Default Re: You guys follow Bill Miller? Legg Mason Value guy

i'm making a modest profit on countrywide..........their CD rates are among the highest in the country.......BTW mark......luck counts
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Old 11-03-2007, 05:04 PM
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Default Re: You guys follow Bill Miller? Legg Mason Value guy

I am up on XLF and XHB ; these are the ETF's for financials and homebuilders. I am hoping it will be a good trade through the holidays.
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Old 11-04-2007, 05:22 AM
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Default RE: You guys follow Bill Miller? Legg Mason Value guy

Life has been good for Bill Miller.......here is a link to a video of his boat.

==========================

http://www.powerandmotoryacht.com/vi...ideo%2Dutopia/
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Old 11-04-2007, 05:32 AM
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Default Re: You guys follow Bill Miller? Legg Mason Value guy

Whike at Atlantis last April this huge 238' Mega 3 story yacht comes in and absolutely stands out among the other yachts. I went home, looked up "Utopia" and found out that is a hedge fund managers boat...someguy named Bill Miller.

Of couse some of those stocks you mention are doing really well and probably will have a significant pullback. I looked at what is performing the best and combined it with a little Buffett attitude of look around and what do you see being used, bought, etc. Apple has been an outstanding company, reinvented itself with the iPod and the Mac sales are doing excelent, I feel extermely confident in this company. Take a look around and see how many Apple products are around, at the malls, the Apple store, Best Buy has it's own Apple section, and every 10-30yr old seems obsessed with the products. Was watching a concert of David Gilmour the other night and couldn't help but notice that every person had an Apple laptop.

I've noticed RIMM is everywhere where the Apple crowd is not, corporate America. Everyone of of my friends, coworkers and all of the industry has a BlackBerry. Again, couldn't help but notice at the FLL boatshow all the people doing business at lunch on their BlackBerry's. Pretty impressive to me.

Google is an incredible advertising web search engine and could see 50 billion in revenue. Google is the search engine of choice for everyone I know.

I know these things may pull back but these companies have a good business model, very realistic chance of continued growth and honestly do have a lot of emotion and momentum behind them. Even with a 10-20% pullback on any of these I'll bet a lot of people will still have made a decent profit. And if they do drop, I am sure there are people waiting to buy at a better price.

Think I'm on the right page at all?

--JK
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Old 11-04-2007, 02:09 PM
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Default Re: You guys follow Bill Miller? Legg Mason Value guy

SeaNile,

I am happy that you have done so well with those names. Crox was a highflyer too before it got decimated a few days ago. But anyways fact remains that if you had invested in APPL instead of F (which I did), you doubled your money, which I did not. So I am the dumb guy, and I concede it.

But what Bill Miller is saying is that one SHOULD look into stocks that everyone has been dumping in droves (financial and housing) as historically the entry points long term are outstanding.

If I were you, and I had doubled my money, I'd sell 1/2 of my position in each of the high flyers, and buy the cheap stuff. If you had lost money on other stocks earlier in the year, or a house, I'd do that even quicker (tax losses offsetting tax gains).

The fact that I am saying this now means that you should do the opposite
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Old 11-09-2007, 03:14 AM
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Default Re: You guys follow Bill Miller? Legg Mason Value guy

Timebandit... I saw your thread on APPL. Read the letter at the top of this thread. I am not a smart man (in my best Forrest Gump voice), but I am long three things now. Ford, XLF, XHB. (and cash)
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