Beating Bill Miller

Ever since my advisor recommended Bill Miller’s Value Trust fund I’ve been following him closely. An article, “Beating Bill Miller” caught my eye. The article raises the interesting point, that while he has beaten the S&P 500 every year for the past 15 years, there are other funds that, while maybe losing to the S&P500 in any given year, have beaten his fund over the same time period:

We congratulate Miller on his fine performance, but we’d be remiss if we did not point out that while he has indeed outperformed the S&P 500 Index since the first Gulf War, there are funds (22 of them, in fact) that have outperformed Legg Mason Value Trust over the same time period, according to Morningstar.

Even though these funds may not have beaten the benchmark in each and every year, they have produced returns higher than the 16.44% annualized posted by Miller over the same time period (net of fees and reflecting reinvestment of all distributions).

Miller himself tries to play-down the emphasis on beating the market on a yearly basis and tries to remind investors to think longer term:

In a letter this week to shareholders, Miller said that investors buying into LMVTX because of its 15-year run of benchmark-beating may be setting themselves up for disappointment. “Our goal is to construct portfolios that have the potential to outperform the market over an investment time horizon of three to five years without assuming undue risk,” writes Miller. “If we achieve that goal, we believe we will be doing our job, whether we beat the market each and every year or not.”

In the next couple articles I’ll go over a few of the article’s suggestions for other value-oriented funds which have beaten the S&P500 and Bill Miller’s Value Trust in the past.

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