“Bill Miller has done it again, but it was a close call. Miller’s Legg Mason Value (LMVTX) extended its winning streak against the S&P 500 Index to 15 straight years, with a 2005 return of 5.32%. The S&P 500 returned 4.91% for the year.
Miller’s aversion to commodity producers, specifically energy stocks, meant he had an uphill climb in 2005. In addition, duds like Tyco International and eBay (EBAY) added to the challenge. However, big bets on Google (GOOG) and UnitedHealth Group (UNH) won the day.
Those stocks nicely illustrate Miller’s style. He believes that you have to stick your neck out on controversial or at least misunderstood names to beat the market. EBay and Google are bold bets because their multiples are so steep that they need nearly flawless execution to produce good returns for shareholders. Yet, Miller will also buy fallen growth stocks where controversy has frightened off less-secure money managers. Hence, Tyco and UnitedHealth.
While his streak against the S&P 500 is a fun way to keep score of Miller’s accomplishments, his goals revolve around long-term success versus the market. The consistency of his record helps to keep investors in, but his 10-year return is more impressive. The fund has gained an annualized 15.19% over that period, which is about 6 percentage points per year better than the index. For more perspective on the streak, read Chris Traulsen’s Fund Spy column from November 2005.”
