When I was in university, a gentleman in school was pitching to be a university lecturer at NTU. He spoke about two legends in investing Peter Lynch and Bill Miller.
Peter Lynch retired as a multi millionaire with an unrivalled track record for the ages. If he stayed on he would probably be like Warren Buffett. But he retired in 10 years so we would never know then.
Bill Miller beat the market for a while, 14 years to be exact. A one in 2.3 million chance.... Until he didn’t. Yet he continues to be admired in the fund industry. Here’s why.
1. He is a value investor at heart even if he buys high PE stock. Here’s a quote from Wikipedia
“Value investing means really asking what are the best values, and not assuming that because something looks expensive that it is, or assuming that because a stock is down in price and trades at low multiples that it is a bargain … Sometimes growth is cheap and value expensive. . . . The question is not growth or value, but where is the best value … We construct portfolios by using ‘factor diversification.' . . . We own a mix of companies whose fundamental valuation factors differ. We have high P/E and low P/E, high price-to-book and low-price-to-book. Most investors tend to be relatively undiversified with respect to these valuation factors, with traditional value investors clustered in low valuations, and growth investors in high valuations … It was in the mid-1990s that we began to create portfolios that had greater factor diversification, which became our strength …We own low PE and we own high PE, but we own them for the same reason: we think they are mispriced. We differ from many value investors in being willing to analyze stocks that look expensive to see if they really are. Most, in fact, are, but some are not. To the extent we get that right, we will benefit shareholders and clients.[1]”
2. He beat the market from 1991-2005 and was an early picker of Amazon when nobody fancied it.
3. He remains relevant with his thoughts about Bitcoin. Here is a passage from his 2020 Q4 writeup.
“Finally, a few thoughts on bitcoin, the best performing asset category in 2020. At this writing, it is trading at over $31,000, up more than 50% since the middle of December. It has outperformed all major asset classes over the past 1, 3, 5, and 10 years. Its market capitalization is greater than JP Morgan and greater than Berkshire Hathaway and yet it is still very early in its adoption cycle. The Fed is pursuing a policy whose objective is to have investments in cash lose money in real terms for the foreseeable future. Companies such as Square, MassMutual, and MicroStrategy have moved cash into bitcoin rather than have guaranteed losses on cash held on their balance sheet. Paypal and Square alone are estimated to be buying on behalf of their customers all of the 900 new bitcoins mined each day. Bitcoin at this stage is best thought of as digital gold yet has many advantages over the yellow metal. If inflation picks up, or even if it doesn’t, and more companies decide to diversify some small portion of their cash balances into bitcoin instead of cash, then the current relative trickle into bitcoin would become a torrent. Warren Buffett famously called bitcoin “rat poison.” He may well be right. Bitcoin could be rat poison, and the rat could be cash.”
Read the full letter here (https://millervalue.com/bill-miller-4q-2020-market-letter/)
Till next time. Invest well.
Joel Siew
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