In the world of successful mutual fund managers, Peter Lynch is well-known for his impressive achievements, but Bill Miller III, a former portfolio manager with Legg Mason, has also amassed an impressive track record. With a background in the Army and a Ph.D. in philosophy, Miller took over as manager of Legg Mason Value Trust in 1990 and outperformed the S&P 500 Index for 15 consecutive years through 2005. Early investments in companies like America Online and Amazon.com contributed to his success, but a heavy focus on financial stocks during the 2007-2009 recession led to his eventual departure as manager in 2012.
After leaving Legg Mason, Miller made a significant investment in bitcoin in 2012 after attending an informative lecture, purchasing the cryptocurrency at an average price of around $700. Bitcoin’s current value of nearly $60,000 per coin has made it one of his most successful investments. Today, his son Bill Miller IV runs Miller Value Partners, focusing on value stocks and managing mutual funds and ETFs with approximately $290 million in assets under management. Miller’s firm sold the Opportunity Trust, which had over $1 billion in assets, to Patient Capital Management in 2023.
During an interview, Miller shared insights on his investing philosophy, which includes a focus on high return on capital, free cash flow, and smart capital allocation. He discussed some of his successful investments in companies like IBM, Dell, and Amazon, highlighting the importance of understanding a company’s fundamentals and future potential. Miller also emphasized the significance of free cash flow yield as a predictor of future returns and shared his experience with investing in disruptive technologies like Netflix.
One of Miller’s biggest disappointments in his investing career was his investment in Kodak during the transition from film to digital. He learned the importance of being cautious in the face of technological disruptions and emphasized the need for careful portfolio management. Miller also reflected on his experience during the 2008 financial crisis, where he stayed with financial stocks for too long but eventually recovered by investing in companies like Wells Fargo and JPMorgan.
When asked about advice for young investors, Miller stressed the importance of not trying to forecast the market or the economy. Instead, he recommended focusing on understanding what is happening and developing an edge through information, analytical, or behavioral advantages. Miller also emphasized the value of reading widely to expand one’s knowledge and recommended several books on investing, philosophy, and intellectual history. Ultimately, Miller’s insights serve as valuable lessons for investors looking to navigate the complexities of the market and achieve long-term success.
