While Legg Mason Value Trust manager Bill Miller's famed 15-year streak of beating the market came to an end in 2006, investors will still want to read his latest letter to shareholders. A rough year aside, he is still one of the greatest investing minds of our time. While he is considered to be a value investor, he has gained notoriety for investing in stocks not normally seen as value stocks, including high P/E stocks like Google. Some of the highlights from his latest letter:

My colleague Michael Mauboussin applied some of Gould's analysis to investing in Chapter 6 of his book More Than You Know. What are the chances it was 100% luck? There are two broad ways to look at it, one involving a priori, and the other a posteriori, probabilities. If beating the market was purely random, like tossing a coin, then the odds of 15 consecutive years of beating it would be the same as the odds of tossing heads 15 times in a row: 1 in 215, or 1 in 32,768. Using the actual probabilities of beating the market in each of the years from 1991 to 2005 makes the number 1 in 2.3 million. So there was probably some skill involved. On the other hand, something with odds of 1 in 2.3 million happens to about 130 people per day in the US, so you never know.

The book he refers to, More Than You Know is one of the better, more original investing books to come along lately. Order it with a copy of Robert Hagstrom's book Latticework: The New Investing. Here's another gem that was in the letter that I will certainly be adding to my list of favorite quotes about investing:

As I often remind our analysts, 100% of the information you have about a company represents the past, and 100% of the value depends on the future.

And he offers a strong case for how and why investors can do better than the market:

The market does reflect the available information, as the professors tell us. But just as the funhouse mirrors don't always accurately reflect your weight, the markets don't always accurately reflect that information. Usually they are too pessimistic when it is bad, and too optimistic when it is good.

Bill Miller's letters to shareholders contain some of the best insight into investing that can be found at any price. Use Google to find copies of his old ones, and be sure to read the new ones as they come out.

Bill Miller, the famed Legg Mason fund manager, was on television last week. He said he is long on housing stocks.

In Barron's Up and Down Wall Street column (subscription required), Doug Kass of Seabreeze Partners said he was short housing stocks - no big surprise there. Kass referred to order cancellation as the reasoning for his bearishness.

Typically, publicly traded homebuilders have cancellation rates of 15% of orders. However, that number has jumped considerably. Cancellation rates of publicly traded homebuilders:

• Centex (NYSE: CTX) - 37%
• DR Horton (NYSE: DHI) - 40%
• KB Homes (NYSE: KBH) - 53%
• Lennar (NYSE: LEN) - 31%
• Pulte Homes (NYSE: PHM) - 36%
• Beazer (NYSE: BZH) - 57%
• Hovnanian (NYSE: HOV) - 35%
• MDC Holdings (NYSE: MDC) - 49%
• Standard Pacific (NYSE: SPF) - 50%

These numbers (from the Barron's article) are so bad that the worst might be unfolding right now.

TheFly's advice, Miller tends to be too early and Kass is often too negative when the worst is already priced in the stocks. I'd say, start following these stocks again, expecting a bottom in the spring and early summer.

The most recent rally is mostly from an oversold condition. I'd wait for another correction and see where the industry fundamentals stand.

Bill Miller, the stock-picking wizard behind the Legg Mason Value Trust Fund that has outperformed the S&P 500 index for 15 -- yes, fifteen -- consecutive years, is finally eating a little exhaust. This year, the 500-stock index (which will likely finish up more than 14% year-to-date) will outdistance Miller's fund by a wide margin, thanks to the fund's precipitous summer swoon.

Concerns are mounting that Miller, whose fund's sheer size is limiting its flexibility, might have reached the end of the golden path. Investors can't help but overwhelm a good thing, and Miller's success with contrarian plays has garnered so much attention that whatever he does can convert contrarianism into mainstreamism. He made some bold moves in tech bellwethers Yahoo! Inc. (NASDAQ: YHOO), eBay Inc. (NASDAQ: EBAY), and Amazon.com Inc. (NASDAQ: AMZN) that didn't play out, and he placed a lot of faith in homebuilders when the softening housing market sent many to the cashier.

But most investors who've ridden this far with him are reluctant to jump off the gravy after one poor year (which, really, was only a poor four months). The fund has outperformed the S&P's torrid run since August, and many of Miller's current holdings -- such as UnitedHealth Group Inc. (NYSE: UNH), Aetna Inc. (NYSE: AET), KB Home (NYSE: KBH), and Pulte Homes Inc. (NYSE: PHM) -- seem poised to rebound from their lower valuations and enjoy a solid '07.

Too much is being made of the end of his 15-year streak. It's an abstract idea based on an arbitrary 12-month cycle. Miller has a basket of goodies and a boatload of momentum heading into the new year. Anyone who cashes out on him now is nuts.

Bill Miller, one of the world's greatest money managers, had his worst year in over a decade. His investments in eBay Inc. (NASDAQ:EBAY), Amazon.com Inc. (NASDAQ:AMZN), and Yahoo! Inc. (NASDAQ:YHOO) killed his performance in 2006. But, he justified his Yahoo! holdings by saying the stock could go from its current $26 to $40 next year. Maybe his grief over losing all that money has clouded his judgment.

Miller thinks that Yahoo!'s new search technology for advertisers, the so called Panama Project, will drive both the company's earnings and its stock price. He has not made it clear why he thinks any advertisers would switch from Google Inc. (NASDAQ:GOOG), which has almost the entire market and a product that works remarkably well.

It is also worth noting that in the November comScore numbers on Internet audience, News Corp.'s (NYSE:NWS) Fox Interactive passed Yahoo! to move into first place for total pageviews. (Fox Interactive pageviews include MySpace of course.) Yahoo! shareholders cannot be too happy about that. Google also made big strides forward as seen in the study.

Maybe Yahoo! should sell Panama back to the Panamanians.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Late last week, the legendary mutual fund manager, Bill Miller, published his quarterly report to shareholders of Legg Mason Value Trust (LMVTX). For each of the past 15 years -- despite much tumult -- he has beaten the S&P 500.

Although, as for this year, his performance has been subpar (but, hey, there is still time left for him to make a comeback). Nonetheless he says he is "somewhere between bullish and very bullish."

OK, so what stocks is Miller focused on?

He only mentioned one: Amazon.com, Inc. (Nasdaq: AMZN). Keep in mind that Miller is a well-known intellectual, who routinely quotes obscure authors, scientists, and philosophers when describing his analysis of stocks. In other words, might he be interested in Amazon.com because he's a big-time customer?

Perhaps. But Miller thinks that Amazon.com has a powerful business model -- which is likely to see increased operating margins. If correct, he thinks investors will get an "excess return." Yes, with phrases like that, he is definitely the intellectual type.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.

Who wouldn't want to follow in the footsteps of this century's great investors? SmartMoney tries to give its reader that opportunity in its August cover story profiling the likes (and the stock picks) of Warren Buffett, Bill Miller, Chris Davis and others.

It's a fascinating read and one that left me chomping at the bit to go invest my spare cash. Sears Holdings (SHLD), Merck (MRK), and News Corp (NWS) were the names that caught my eye. If I had any spare cash I would probably be doing some buying rather than writing this blog post. But since I don't, I'll instead enumerate the reasons why it may not make sense to follow the stock picks of the pros:

• They bought back then, but would they buy now? You just don't know. Buffett bought ConocoPhillips, General Electric (GE) and United Parcel Service (UPS) in the past year. But has he held onto them? Did he buy for reasons that have nothing to do with his view on their long-term potential (that's always a possibility with Wall Street pros)? My guess is the answer is "no" to both those questions, but we just can't be sure what Buffett was thinking when he bought and if he'd do the same thing today.
• What if they are due for a cool streak? Bill Miller has been an investing phenomenon, beating the S&P year after year. Some academics would argue that it's pure luck. The article points out that his bets on United Health Group (UNH) and Aetna (AET)aren't looking so good and a couple of his August cover picks -- Yahoo and Dell -- have stumbled badly lately. But Sears Holdings (SHLD) sounds like a decent idea to me.
• Are they playing it safe? Christopher Davis picks Wal-Mart and Microsoft. Those sound like fine choices for the core of a portfolio, but I doubt they are really his best ideas. News Corp (NWS), his third idea sounds like the smartest to me. And the stock is doing terrific this year.

The article is well worth reading and if you are looking for some good ideas, this is a great place to start. But just as with any investing article, it should just be the starting point for further research.

Here's another shocker: I LIKE GOOGLE BETTER THAN AMAZON!!!

I have written many times that I think Google is overvalued and the stock price should come down. It has and it will continue to do so. So all you dreamers of further upside pops should temper your outlook. Long term it goes up, but for now it goes down, and it will never equal the valuation of GE or Exxon.

However, I have been down on Amazon for years, right from the time of the IPO. People have made great sums and lost great sums on this stock and the price has always been a joke to me. I consider Jeff Bezos to be very bright and yet I view him as the Flim Flam Man. I used to call him "smilin' Jack", almost has a kind of mad man's glow to him, like Nero... He just needs the fiddle.

Amazon is one of my favorite targets and it was one of the issues that brought me to the attention of financial editors years ago.

The Numbers. As I write, Google's P/E is 56 and I think fair value should be closer to 40. I cannot see looking at it for investment until it moves down another 50 to 60 dollars.

Amazon on the other hand has a P/E around 36. Even after its partial free fall this week, I still think that the P/E is nuts. People have been comparing it to an Internet company and that's a mistake. Yahoo is an Internet company, Google is an Internet company, even News Corp with MySpace is an Internet company. Amazon is a sales company.

If you read any of the many business magazines that I read (which is most of them), you will find that they give some very good advice regarding the benefits of investing in Index Funds over the long haul. However, once a year they publish things like the "Top 1,000 Funds" and variations on this theme. To me this contradicts their year-round advice just to generate an extra issue that serves no purpose except to confuse investors. I think 90% of the 1,000 funds are garbage and exist only to generate revenue for the investment company. They cater to a public fascinated by quantity of choice and various meaningless nuances and not by good sense.

Most of the data I have seen supports the premise that index investing (notably the S&P 500) beats stock picking (higher Internal Rate of Return (IRR)) over any 20 year period you choose. Plus, it has the added benefit of less market volatility. This makes it the optimal choice for most people. This is even more true when you consider taxes and fees.

Furthermore, if it were not true then investment guru and fund manager Bill Miller of Legg Mason would not be such a celebrity for beating the Standard & Poor's index for 14 years running. Have you read about any others? NO! There are many advisor's who may beat the index funds for a period of time, but not a long period, and it is usually not the same ones.

Business publications, such as Time Warner's Money and Fortune, should have a disclaimer accompanying their fund reviews. Or, giving them the benefit of the doubt, perhaps I should view these mag-rags as the publisher's way of giving us an opportunity to see for ourselves that none of these funds provide much added value -- unless you own the fund company.