![]() ![]() “That’s because prices reflect recent history, current fundamentals, and reasonably foreseeable prospects, those looking out, say, six to nine months, all filtered through the prism of psychology and emotion.” “ Stock prices change far more rapidly than does intrinsic business value,” Miller said during fiscal year 2000. “If you want to boil down everything we do, it's this: The guy with the lowest average cost wins.” Miller believed that timing the market was futile (though he had just made a call on the technology sector) and was happy to buy a stock as it continued to decline. He was looking to capitalize on other investors’ short-term time horizons and behavioral or analytical mistakes. In this piece we’ll explore Miller’s fondness for averaging down, the run-up to the financial crisis, his very public failure, and his rebound.īuying at a discount to intrinsic value remained the cornerstone of Miller’s investment philosophy. Fortunately, his other favorite group, “the long-lagging financials,” had finally “begun to perk up.” At the end of the dotcom bubble, Miller recognized a shift in the market and reduced his exposure to technology. We explored his multi-disciplinary approach and how he was influenced by the science of complexity at the Santa Fe Institute. In the first part I wrote about Miller’s successful transition from traditional value investing to investing in technology companies. In this, the second part of a two-part series, I let him mostly speak for himself. Through it all, the ups and the downs, Miller generously shared his thoughts, reflections, and frank self assessments in his letters. But he failed to see crucial differences between his past experiences and the housing crisis of the mid-2000s and ended up as one the era’s biggest losers. Miller stuck to his principles but evolved his strategy during his run of beating the market 15 years in a row. He has a lot to teach about investing and navigating an uncertain and changing world. I’ve been fascinated with Miller’s life and career. ![]() At the point of his most assets under management, the eternal long-term optimist failed to recognize that the ground had shifted beneath his feet. But between 20 lay the greatest failure of his career. This was typical of Miller, who liked to assert that “the path of least resistance for the stock market is higher.” Most of the time, he was correct. ![]() This past October, Miller remarked that “nothing” worried him because the market spent an “inordinate amount of time worrying,” and time was better expended on making good long-term investment decisions. It was clearly a terrific time to invest.” “The economy was in recession, stocks were down, banks - our largest industry concentration - were failing, Saddam Hussein occupied Kuwait, and oil had spiked to about $40 per barrel. “I took over sole management of the fund in November 1990,” he wrote. In March 2002, in the middle of the dotcom bust, Bill Miller reminisced on the last bear market. ![]()
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