Renowned money manager Bill Miller admitted he?s slumping.
In a recent investment commentary to shareholders, Miller, chairman and chief investment officer of Legg Mason Capital Management, said, “This letter will be short and to the point: We had a bad 2007, which followed a bad 2006.”
Miller?s Legg Mason Value Trust Portfolio, the only mutual fund to outperform the S&P 500 for 15 consecutive years from 1991 to 2005, has underperformed the S&P by about 20 percent in the last two years.
“The decline in financials reflected the freezing up of credit markets that began in August and which still persists,” Miller said. “All of this was accompanied by the decline in the housing stocks, which fell almost continuously throughout 2007, ending with a loss of almost 60 percent on average.”
The Federal Reserve?s decision to cut the funds rate to 3 percent and the government?s $168 billion economic stimulus package should jump-start the economy, he added.
“If these measures aren?t enough to free up credit and stimulate spending sufficient to set the economy on a growth path, then additional measures will be taken until that is accomplished,” Miller said.
Until the economy stabilizes, the market will continue to swing up and down. Housing stocks are actually up for the year, and financials appear to have bottomed. “Traders and those with short attention spans may still be fearful, but long-term investors should be well rewarded by taking advantage of the opportunities in today?s stock market,” Miller said.
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 analystfor Morningstar, a Chicago-based investment research firm.
“These funds should rebound on the basis of their historical record, but it does make Legg?s marketing more difficult in the meantime,” Richards said.
Legg Mason?s stock price has fallen about 6 percent since the beginning of the year.
