Meet Bill Miller
the efficient-market theory states that the price of an asset at any given time reflects all the information about it. and hence the theory implies that it’s impossible to ‘beat the market’ and generate alpha as there is no new information to which the market prices would react.
but value investors opine that not all equities are always accurately priced and some trade at a discount to their intrinsic value. therefore, they present an opportunity to generate returns over and above the market return.
fund managers constantly try to beat the market but the data over the decades shows that Mr. Market knows better and most fund managers are not able to generate alpha for their investors.
but Bill Miller managed to beat the broader market benchmark S&P 500 consistently for 15 years in a row from 1991 to 2005, somewhat disproving the efficient-market theory. he believes that any stock is a value stock if it trades at a discount to its intrinsic value.
Miller joined the Legg Mason Capital Management Value Trust in 1981 and brought with him a very traditional value investor mindset. Legg Mason he says gave him the unheard-of freedom to do things he wanted to do on the investment side. paying attention to the academic literature of their investment strategy, he and his colleagues constantly tested their investment approach and were flexible to changes.
but Miller’s dream run came to a halt during the 2008 financial crisis where he took a major hit as he had large bets placed on the likes of Bear Stearns and Freddie Mac. soon his flagship fund lost 55% of its value which led to an exodus of investors as well. the assets under management (AUM) fell from $77 billion to $800 million. Miller saw his wealth shrink by around 90% in a period of months.
this wasn’t the end of Miller though. he had been investing in Amazon since the time it got listed which came to his rescue and later Bill also recognized the potential in Bitcoin and started investing in the cryptocurrency at an early stage.
Miller left Legg Mason in 2016 and is currently the chairman of Miller Value Partners. in 2019, Miller Values generated a 119% return emerging as one of history’s best-performing hedge funds. the firm has $2.8 billion in assets under management.