Legg Mason?s star stock picker Bill Miller thinks the worst of the credit crisis has passed.
Miller, chairman and chief investment officer of Legg Mason Capital Management, said Legg Mason?s Value Trust lost 19.7 percent in the first three months of the year, more than double the loss of 9.4 percent for the benchmark Standard & Poor?s 500 Stock Index.
The fund manager said the quarter was “awful” but added that now might be the time to put more money in stocks because financial and consumer stocks have all but bottomed.
“We will do better from here on, and that by far the worst is behind us,” Miller wrote in a letter to shareholders last week. “The credit panic ended with the collapse of Bear Stearns, and credit spreads are already much improved since then.”
Miller expects the stock market to improve in the coming months because stock prices are fair, interest rates are low and corporate finances are strong.
“That sets the stage for what should be an improving environment for investors in stocks,” Miller wrote.
Since Miller assumed sole management of the fund in 1991, the Legg Mason Value Trust outperformed the S&P 500 the first 15 years before underperforming the last two years.
“From the standpoint of statistics, we were due,” Miller wrote. “Every investor goes through periods of poor relative results.”
Miller still has an outstanding investment record, outperforming the S&P in 19 of the last 25 years, but his recent performance could hurt Legg Mason in the short term, said Andrew Richards, an analyst for Morningstar, a Chicago-based investment research firm.
“These funds should rebound on the basis of their historical record, but it does makeLegg?s marketing more difficult in the meantime,” Richards said.
Since the beginning of the year, Legg Mason?s share price has fallen about 15.5 percent to $61.89 a share.
