Legg Mason Value Trust manager Bill Miller built his reputation -- and the fortunes of his investors -- by beating the benchmark S&P 500 for 15 years, a streak that ended in 2006.

But since that run ended, the fund has struggled mightily with bad bets on companies like Countrywide Financial (NYSE: CFC), Bear Stearns (NYSE: BSC), and Yahoo! (NASDAQ: YHOO). Now Miller's investors are questioning his philosophy, and so is is the legend himself.

A big part of Miller's brilliant track record was his belief in focus investing -- concentrating his bets on a few stocks rather than a bunch. The Legg Mason Value Trust holds just 35 stocks. But according to the New York Times, that strategy is now being reconsidered. Miller said that "The question we are asking ourselves is: Should we think more broadly now about probability, about high-impact events and protecting against them by having broader exposure to the market?"

I seriously doubt that that's the right strategy. Miller is universally acknowledged to be a great stock picker -- diluting his influence by building a portfolio consisting of his 200 best ideas instead of his 35 best sounds like a sure road to mediocrity.

The larger point is this: After a 15-year streak of greatness, Miller has hit a rough patch. Two years of underperformance doesn't change 15 years of greatness, and this is a bad time to consider changing the strategy that led to his track record.

The influential breakingviews column thinks that Yahoo! (NASDAQ: YHOO) could use a shareholder activist (subscription required).

Citing its "discredited management team, a corporate strategy in need of a makeover, stock-price underperformance, a large free float with no controlling shareholder, cash on the balance sheet and many moving parts whose values don't appear to be adequately reflected in the Yahoo share price," breakingviews believes that an independent shareholder willing to take on an entrenched management team could unlock considerable value for the company's shareholders.

The question is how many shareholder activists -- who frequently prefer to target companies with more traditional, less complex business models -- would feel comfortable diving into a company that's been getting hammered by Google (NASDAQ: GOOG).

But the potential for value to be unlocked makes Yahoo! shares seem more interesting. Perhaps institutional shareholders could put pressure on the company to take more drastic steps to unlock value.

Companies that are good targets for activists are often good investments in general, with or without activist involvement. The first step for an activist in finding a good target is finding an undervalued stock. As Ronald Orol writes in an excellent column for TheStreet.com, "Good activist investors, at their core, are great stock pickers."

Oh and, if you haven't already, go buy Orol's wonderful book about activist investors, Extreme Value Hedging. It's one of the best, most original books about the market to come along in recent years.

On yesterday's Mad Money, Jim Cramer offered his "Mad Money Manual" -- a guide to how to watch the show inspired by the criticism of his stock-picking track record leveled by the press.

The show is actually a recap of an episode from May, but I missed that one so I'll opine on it now. According to TheStreet.com's recap of the show:

In a given week Cramer said he might recommend a dozen stocks, excluding the ones in the "Lightning Round." But just because Cramer says he likes a stock, doesn't mean that viewers should go out and buy it.

Nor does it mean that if people buy that stock they will absolutely, positively make lots of money, Cramer said. "That's not how this game works."

Cramer stresses the importance of doing your own homework, but here's the problem with that advice: Can the Average Joe with a 10-inch TV and Yahoo! Finance really expect to uncover something that hedge fund legend Jim Cramer has missed?

To me, it was inevitable that PetroChina ADR (NYSE: PTR) would become one the largest companies in the world, so I am not surprised by news that it has surpassed General Electric (NYSE: GE) to become the world's second largest company. It now stands behind only Exxon Mobile (NYSE: XOM), and has a much faster growth rate.

I have been shouting about this stock to anyone who would listen since I started writing for BloggingStocks, and hopefully a few have taken notice and earned some money with me. While GE has made some modest gains this year moving almost in lockstep with the indices, PetroChina is up almost 70% and has been paying a generous dividend the entire time. PTR reached a value of $434 billion riding the news of $85-a-barrel oil while GE is hanging tough around $413 billion on a down day in the market.

My original thesis when PTR was at $44 a share, paying about a 5.5% dividend yield and carrying a trailing P/E of 9.5, was that this stock was having a fire sale. Since that time, the stock has simply been on fire. I liked this stock because I felt that few things come close to the certainty of the sun rising in the morning, but the Chinese consuming more oil tomorrow than they did yesterday was one of them. The last time I recommended the stock, it was trading at $142.12 last December when I suggested investors add it to their watch lists for an opportunity to acquire it. That opportunity came as it dipped as low as $108.18.

Worlds apart, Cramer and Orman speak to totally different classes of investors. Jim Cramer is the fast-talking showman talking primarily about stocks and Suze Orman is a slow-talking educator preferring funds. While Cramer likes to jump around playing with bells and whistles, Orman is making sure she speaks clearly and enunciates to her audience so they can understand and follow along.

The biggest difference between the two gurus is that Orman is interested in what you do with 90% of your assets and Cramer is only interested in the 10% Mad Money. Orman talks about getting people started on actually thinking about their personal finances and financial well-being. Cramer is interested in the sport of investing. He gets a rush from the whole subject. Orman is in no rush and much more sedate. Clearly Orman offers far more sound advice in the form of broad investing principles you can live by year in and year out with a minimal amount of work. That said, watching her is like going to your history and geography class. Valuable information, but not the highest form of entertainment. Cramer is a stock trader, and that fact by itself has proven to be harmful to most investors, even professionals. But his investment broadcasts are more like visiting the sports book in Las Vegas with 100 games in play at the same time.

For about 16 months I have been writing about business news, the over-all market, pet peeves and some stocks I like. At times I have responded to inquiries in the comments section or follow-up posts. Sometimes I have responded directly to some of our regular readers. Many of our readers are quite-well versed in the investment world and the stock market in particular; and I have learned some things from them too. On many occasions something a reader has commented on has stimulated another story, and I have done several sagas during my tenure.

BloggingStocks has improved every month and when I look at the company I am keeping lately I am flattered to be among them. Our editors have been extremely encouraging and supportive. One of the best features about this site that I think puts us head and shoulders above others is the almost instant feedback afforded by the comments section and the dialog that ensues. This is not possible in magazines or sites trying to compete online with large business journals.

Barron's cover story on Jim Cramer this week is a perfect August cover: beach reading about whether Cramer is a good stock picker.

Cramer and I went to college together and I was a board member at TheStreet.com (NASDAQ: TSCM), so I am not unfamiliar with Jim's career.

The Barron's piece starts out by saying the viewer of Cramer's show Mad Money would only have made 12% on Cramer's picks over the last two years. The magazine uses a firm called YourMoneyWatch to determine that. It tracks Cramer's stocks from when he tells viewers to buy them up until he says that they are "sells." In a chart, Barron's shows Cramer's performance against the two year advances of the Dow at 22% and the S&P at 16%.

Cramer has a wide following. His Mad Money show has 138,000 viewing homes according to Nielsen. Several hundred thousand more people read him through products at TheStreet. He is written about in the press several times a month, so Cramer is almost certainly the most widely followed stock guru in the country.

The cover story on this week's Barron's is likely to get attention for a long time, and may even serve to drive down the price of TheStreet.com (NASDAQ: TSCM), Jim Cramer's company. Journalist Bill Alpert takes a look at the track record for Cramer's picks on his show Mad Money.

According to Alpert, "a comprehensive and careful review of his stock picks by Barron's finds that his picks haven't beaten the market. Over the past two years, viewers holding Cramer's stocks would be up 12% while the Dow rose 22% and the S&P 500 16%, according to a record of 1,300 of the CNBC star's Buy recommendations compiled by YourMoneyWatch.com, a Website run by a retired stock analyst and loyal Cramer-watcher."

I would never dream of buying any stock based on Cramer's recommendation, and here's why: Warren Buffett, one of the greatest investors in the world ever, has often said that he can only find a few good investment ideas per year. All you need is a few in your life to do well. How about Jim Cramer? He gives a few stock picks per show, five days a week, and then gives dozens more buy and sell calls on the Lightning Round each week.

This flies in the face of what most people understand about the markets. We can argue about the extent of their efficiency (Burton Malkiel would argue that nearly every stock is perfectly priced all the time) but the idea that anyone, even a guy who bites heads off of bears, could find so many market inefficiencies each day is absurd. If Cramer can do that, how come almost no one can beat the market? Cramer makes it too easy -- except, according to the Barron's report, he doesn't really. He just pretends to on TV.

"Fed Chair" James Cramer enjoyed taking credit for yesterday's announcement that the Fed had eased its Discount Rate. But today's Barron's takes him to task for trying to keep Mad Money viewers from measuring the extent to which his stock picks underperform the market indices.

Cramer has accomplished many things. He managed a hedge fund, started TheStreet.com (NASDAQ: TSCM) which survived the dot-com bust, he writes columns for New York magazine, and he provides a unique blend of entertainment and stock touting on CNBC.

But Barron's analysis of his stock picks over the last two years suggests that you would have been better off buying a low-cost stock index fund. Barron's cites an analysis by YourMoneyWatch.com that analyzed his stock picks between 7/28/05 and 8/17/07 -- finding that Cramer's picks lagged the general market averages. Specifically, his picks were up 12%, the Dow Jones Industrials Average rose 22%, the S&P 500 gained 16% and the NASDAQ was up 14%.

America is getting tired of James J. Cramer's act. That's the conclusion I draw from mediabistro.com's recent report on the decline in the ratings for Cramer's Mad Money. Cramer's ratings dropped 29% from 2006 -- he fell below 200,000 total viewers at 6pm in May -- averaging 175,000 for the month -- by contrast his May 2006 average was 247,000 viewers. Moreover, his viewership has been dropping in the last few months -- In March, he averaged 255,000, and in April, he averaged 205,000.

To his credit, unlike fellow prime time business buffoon, Donald Trump, Cramer does not even try to create the illusion that he has hair. But I think Cramer jumped the shark as he was writing his self-pitying New York Magazine article which came out last month.

While Mad Money helped pump up interest in the stock market, individual investors are still a sideshow to the current market action. It's institutions, private equity firms, and hedge funds that rule the roost. And they march to a different drummer.

So unless Cramer can totally retool his act -- or perform the miracle of consistently making stock picks that beat the market -- he'll slowly fade into the sunset.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.

I had a chance today to take one of the online Implicit Association Tests (IAT) of Project Implicit, an ongoing study by Harvard-affiliated academics trying to uncover the associations, often subconscious, that guide our perceptions. The test I took was one of gender, and it told me that I am biased toward associating careers with men, family life with women. I admit, I am a product of 1950s television, so the results weren't surprising.

It did cause me, however, to wonder what assumptions we make in considering our portfolio. See if any of these hit the mark –

• Big companies = bad companies. For us children of the '60s, this message was drilled into us during the protests of companies engaged in weapons research during the Vietnam War. Later, movies such as The China Syndrome and Alien 2 mined the same vein.
• Female CEO = Chummy, non-confrontational office atmosphere. The ghost of Mary Richards, Laverne and Shirley, or Monica, Rachael and Phoebe haunt many of us.
• Chinese profits = American losses. We faced this in the 1980s with Japan, and Korea. Perhaps this is a holdover from the depression, when so many people believed in the zero sum game; the rich got richer, the poor got poorer. Even though this has been disproven over and over, it seems to be part of the American psyche. It could also be expressed as Mexican immigrants = loss of American jobs, although I don't see any of my friends lining up to mow lawns.
• The majority is always right. You would think such an irrational corollary to the democratic model would find no traction, but there most be a reason for the dot-com bubble.

Take a few minutes, if you wish, to take one of the Project Implicit tests. See if it doesn't cause you to wonder about the implicit assumptions that color your judgment. And what do you think are some other assumptions people hold about the stock market that I didn't mention?

In Part 1 of this series, I found two possible candidates for my Dow value picks, Alcoa Aluminum (NYSE: AA) and American International Group (NYSE: AIG). Here we review the next five DJIA stocks, searching for further value in light of the frequent new Dow highs. Lately, the Dow seems to be benefiting from the number of companies with growing international business, its higher than S&P average yields (2.3 vs 1.8 as a whole), and the safe haven nature of large caps in a precocious market.

AT&T (NYSE: T) -- Like most of the Dow stocks, T pays a high yield, currently 3.5%, and like the others it pays it consistently. This company is the aggregation of SBC, Pacific Bell, Nevada Bell, Bell-South, AT&T long distance and Cingular Wireless. It is the only one of today's five stocks that I have owned (separately as AT&T and SBC), but I do not own any shares of AT&T now and I do not care to. After all of the expansion done by mergers and acquisitions and only limited internal growth, I am not sure what the upside is.

How much pricing power will the new AT&T have, given ongoing competition in each segment of its business from other wireless carriers, cable television, and VoIP? Considering all of the recent M&A activity, it seems to have relatively low debt and huge cash flow. It also has a P/S, P/B, and P/CF in the lower range of most stocks. But a P/E over 20 is too high given that I do not see where future growth will come from. It seems to me for every competitive battle AT&T might win on one front they may lose an equal amount on another. All things considered, this stock seem fairly priced with limited near-term upside.

A few days ago I received the following inquiry from a frequent reader of my blogs on Chasing Value.

Hi Sheldon, what do you think about: Gannett Company (NYSE: GCI)

P/S - 1.72, P/B - 1.65, P/cash - 9.9, dividend - 2.1%, P/E - 12.4

Publishing sector - quite hot at the moment? ...alex

Alex , you are developing a pretty good understanding of the numbers I look at. Now you should add something else to your calculations. The actual business it is in. When we look at American Home Mortgage Investment (NYSE: AHM) (see Someone asked about Amercian Home Mortgage) or IndyMac Bancorp (NYSE: IMB) (see Chasing Value: IndyMac Bancorp - once in a lifetime,) or many other fallen banks and mortgage companies, we can be confident they will bounce back if they survive the lows. There will always be banks.

Warren Buffett, Chairman and CEO of Berkshire Hathaway (NYSE: BRK.A) has been doing some big time cogitating about the future. He plans to donate the lion's share of his wealth to the Gates Foundation. Recently, he said he was looking for an understudy with the right investing temperament and wisdom to lead Berkshire. There are reports that his office has been swamped with resumes. Some are reaching to the bottom of the barrel in suggesting that I seek an audience. Perhaps they were stimulated by another Serious Money: Freight Railroads - BNI, CSX, UNP & more story which I posted the day before Berkshire Hathaway announced it had become BNI's largest shareholder.

So with this and other prescient commentary I recently posted, I was asked to present some ideas on what acquisitions Berkshire might consider given Buffett's eagerness to find a good deal. It is likely that Buffett will bring several people on board to play the role of Chief Investment Officer for different segments of the company. Nobody in their right mind believes that Buffett is replaceable.

In any event here are some of my ideas on the subject. All of my ideas follow a pattern favored by Buffett including low P/E, P/S, P/B, and P/CF's, as well as a high return on equity and low debt.

It is much better to pick stocks when the market is closed than when it is open. It is much better to pick stocks when you have some peace and quiet. Looking back at stocks I have bought over the last ten years and comparing the results, I would have to say that I have done much better making the decision on the weekend than I did during the trading day with too many distractions, news flashes, and my own rambunctiousness. [From the dictionary - marked by uncontrollable exuberance: Unruly]

I have found various factors that make a difference in the long-term success of investments. Adding WHEN to make the decision is not a factor I've encountered. Simply put, if I was to create a value fund based on my other tested factors, I can now say with almost absolute certainty that adding the 'When factor' would improve its results. So my short list of stock fund criteria includes the following:

• Strong sustainable cash flow
• Low Price-to-Book ratio
• Low Price-to-Sales ratio
• Return on Equity (ROE) higher than the P/E ratio (trailing)
  
• Positive return on Invested Capital (ROIC)
• AND NOW - do not make buy decisions when the market is open

I think it is always a good idea to make decisions when one is less stressful, but I never gave it as much thought as I have recently; especially when it comes to stock picking. Those of you who have read my Chasing Value or Serious Money stories have seen all of this before repeatedly. Now with the last factor, which is not visible to investors in any mutual fund, I add one more area of personal discipline. Of course, for the traders among you, making your decisions when the market is closed might be a tad difficult at times.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out his other posts for BloggingStocks here.