This week on our Masters in Business interview, Bill Miller of Miller Value Partners, which manages $2 billion in client assets. Miller is best known for running Legg Mason’s Capital Management Value Trust, whose after-fees returns beat the S&P 500 index for 15 consecutive years from 1991 through 2005.
He explains some of the difference between the current environment versus the 1990s. The day traders are “trivial” relative to daily market volumes versus an era where day traders where everywhere, with a much greater impact on markets. He owns many of the big cap tech stocks, which are “radically cheaper” than they were in the 1990s.
Miller discusses when and how “Value” beats “Growth” — and vice versa. Since the Market bottomed in March, Value has beaten growth. Over the relatively short term, coming out of the 2020 recession, he thinks value will beat growth for a year or two, before growth reasserts itself. Low nominal growth rates and low inflation are more challenging for Value stocks, and make Growth stocks look cheap.
He also finds bonds pricey and uniquely unattractive.
We discussed the rise of passing indexing in our 2016 MiB conversation — Miller still believes that “Active management is in secular decline.” He adds that most active managers “don’t add value, are closet indexers, and are too expensive.” He expects active mutual funds to continue hemorrhaging capital. Another investment vehicle that is looking at looming Hedge funds have also dropped into a similar liquidation mode in an era of low rates and meager trading profits, 2% + 20% no longer makes sense. He believes hedge funds will also see outflows similar to active mutual funds.
He was a buyer of Bitcoin when it was $200-$400 dollars, and at one time was one of the top 100 holders of BTC. He thinks blockchain technology will find all sorts of new applications int he future. One of the things that makes Bitcoin so different form equities is that the higher the price goes, the more legitimacy Bitcoin gets. Stocks become more precarious under similar circumstances.
A long list of his favorite books are here; A transcript of our conversation is available here.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Overcast, Google, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Martin Franklin of Mariposa Capital. Franklin is an entrepreneur who founded 7 companies, notably: Jarden Corp., Nomad Foods Ltd. and Element Solutions, Inc. and is credited with successfully reviving the use of SPACs, or blank check companies, as public vehicles for long term M&A.
Bill Miller’s Favorite Books
The Magic Mountain by Thomas Mann
Frederick Douglass: Prophet of Freedom by David W. Blight
Nature by Ralph Waldo Emerson
Frank Ramsey: A Sheer Excess of Powers by Cheryl Misak
Karamazov Brothers by Fyodor Dostoevsky
War and Peace by Leo Tolstoy
Moby Dick by Herman Melville
Heart of Darkness by Joseph Conrad
Blood Meridian: Or the Evening Redness in the West by Cormac McCarthy
A Treatise of Human Nature by David Hume
The Varieties of Religious Experience by William James
Essays in Experimental Logic by John Dewey
Schopenhauer: The World as Will and Representation: Volume 2 by Arthur Schopenhauer
Reminiscences of a Stock Operator by Edwin Lefèvre
John Maynard Keynes: 1883-1946: Economist, Philosopher, Statesman by Robert Skidelsky
