This phenomenon is quite common. It's called confirmation bias -- the tendency of decision-makers to seek out information that reinforces their views of the world and to reject information that challenges those views. This is particularly common among those who have been successful. They think that they have figured out a winning formula and when it stops working, they blame everyone but themselves.

This came to mind as I read a CNNMoney story on how Miller's fund has lost 34% of its value since last July. Miller had been famous for beating the S&P 500 every year between 1990 and 2005. But his methods have failed him since. And investors have yanked $2.4 billion from Legg Mason which CNNMoney notes, reported a second quarter loss last week.

Continue reading After 34% drop in Value Trust, Bill Miller needs to go

After 34% drop in Value Trust, Bill Miller needs to go originally appeared on BloggingStocks on Thu, 31 Jul 2008 13:55:00 EST. Please see our terms for use of feeds.

Carl Icahn just got more bad news. His bid for Yahoo! (NASDAQ: YHOO) seems to be losing it momentum, and it should. Legg Mason, which owns 4.4% of the portal company, will support the current board.

According to The Wall Street Journal (subscription required), "We believe the current board acted with care and diligence when evaluating Microsoft's offers," Legg Mason Chairman Bill Miller said.

Other large investors may decide to back the status quo ahead of the Yahoo! Annual Meeting on August 1.

Icahn has made two significant mistakes. The first is that he overplayed his hand with Microsoft (NASDAQ: MSFT) by saying that he had more support from Steve Ballmer for a deal to takeover Yahoo!'s search business than he actually had.

The more profound problem is the Icahn has not taken the time or the effort to show Yahoo! shareholders how he would operate the company if he cannot strike a deal with Redmond. In essence, he has not made it clear how he can make Yahoo!'s shares rise from their current level if the company has to be run as a standalone business.

Icahn will lose his proxy fight for Yahoo!. He has not offered anything beyond a break-up or M&A event. Why would anyone support something so thin?

Douglas A. McIntyre is an editor at 247wallst.com.

Legg Mason to support Yahoo! board, Icahn should lose proxy fight originally appeared on BloggingStocks on Sat, 19 Jul 2008 06:31:00 EST. Please see our terms for use of feeds.

Someone lost a lost of money as the prices of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) hit multiyear lows on news that several analysts believed the federal government would have to take the two companies over. In all likelihood, the move would wipe out common shareholder.

Famous stock-picker Bill Miller of Legg Mason (NYSE: LM) may have been one of the casualties. According to work done by Reuters, Legg Mason, Capital Group, AllianceBerstein (NYSE: AB) and Fidelity lost a total of $4 billion on the mortgage company stocks over the course of last week's trading.

While all fund companies may have been hit equally, which no one can know exactly at this point, Miller's reputation as a leading fund manager is being devastated. After years as one of the most successful portfolio managers in the country, his fund has underperformed the S&P for two years.

It looks like Miller is going for a third.

Douglas A. McIntyre is an editor at 247wallst.com.

Four fund companies may have lost $4 billion in Freddie Mac (FRE) and Fannie Mae (FNM) originally appeared on BloggingStocks on Sat, 12 Jul 2008 06:14:00 EST. Please see our terms for use of feeds.

Here is a novel idea. Big Yahoo! (NASDAQ: YHOO) shareholder Legg Mason thinks more investors would support Carl Icahn's effort to control the portal company if the raider will not sell out to Microsoft or anyone else for under $33. At $32.99 it's no deal.

Legg Mason's Bill Miller told Reuters, "The difficulty with Icahn is he'd have more shareholder support if he would say he wouldn't sell the company for less than $33."

Fair enough. One of the problems with hooking up with raiders is that they often fail. Microsoft (NASDAQ: MSFT) has already indicated it would pay $33 for Yahoo!. Why should shareholder take less?

Miller may be thinking of Icahn's recent deals to pressure Motorola (NYSE: MOT) and Blockbuster (NYSE: BBI) to improve "shareholder value". Neither one of those have done well. Investors who followed Icahn in have lost plenty of money.

Legg Mason's comment makes sense. "Put up or shut up:"

Douglas A. McIntyre is an editor at 247wallst.com."

Yahoo! (YHOO) investor wants price guarantee from Icahn originally appeared on BloggingStocks on Wed, 09 Jul 2008 09:43:00 EST. Please see our terms for use of feeds.

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.

Bill Miller considers move away from focus investing -- why? originally appeared on BloggingStocks on Sun, 11 May 2008 11:10:00 EST. Please see our terms for use of feeds.

Yahoo, Google near ad deal originally appeared on BloggingStocks on Wed, 09 Apr 2008 16:35:00 EST. Please see our terms for use of feeds.

It's been a tough first four months of the year for Bill Miller of the Legg Mason Value Trust (LMVTX), famous for his 15-year run beating the S&P 500. Even after a 4.12% bounce in his fund's net asset value on Thursday, he's down 14.95% for the year. One major culprit? His stake in Bear Stearns (NYSE: BSC) that was once worth more than $200 million, making the fund one of the firm's largest shareholders.

According to the Wall Street Journal (subscription required), Miller's performance reminds him of his tough run that began the 1990s: "Back then, a similar crisis was unfolding in financial markets and Mr. Miller eventually swooped in to buy money-center banks like Chase Manhattan and Citicorp that he thought were underpriced, as well as insurance companies and mortgage lenders. Financials made up as much as 45% of Mr. Miller's portfolio by the mid-1990s, and helped drive his 15-year winning streak as they rallied over the years."

Mr. Miller told his fund's shareholders that "the past two years are a lot like 1989 and 1990," and there's a "reasonable probability the next few years will look like what followed those years."

Maybe so. But investors should be wary of the fact that a big part of Miller's outperformance stemmed from his exposure to financial stocks and now that same exposure is dragging his fund into the lowest echelons of mutual fund performance.

Is the Legg Mason Value Trust just a glorified bet on the bounce back in financials? If so, investors may want to tread carefully, as Miller has been wrong about the sector for awhile.

Bill Miller down 15% year to date originally appeared on BloggingStocks on Sat, 22 Mar 2008 09:10:00 EST. Please see our terms for use of feeds.

You know the old adage for success in the stock market -- buy low and sell high. Well unfortunately too many Americans today are doing the exact opposite as they seek coverage from a very volatile stock market. They bought when this market was near the top and are now selling in panic.

I prefer to watch two men who clearly know how to buy low and sell high -- Warren Buffett (also known as the "Oracle of Omaha" and Bill Miller, a very successful fund manager at Legg Mason, who is known for his 15-year winning streak against the Standard & Poor's 500 stock index.

So are they selling or buying? Both are buying and buying big. According to Sunday's Washington Post, Buffett upped his stake in Kraft Foods (NYSE: KFT), Johnson & Johnson (NYSE: JNJ), U.S. Bancorp (NYSE: USB), and Wells Fargo (NYSE: WFC). He also took a new stake in GlaxoSmithKline (NYSE: GSK). Buffett disclosed that he owns 132 million shares in Kraft, which means he owns 8.6% in the maker of Ritz crackers, Philadelphia cream cheese, and Maxwell House coffee.

Continue reading Follow these leaders: What Buffett and Miller are buying

Follow these leaders: What Buffett and Miller are buying originally appeared on BloggingStocks on Sun, 24 Feb 2008 15:10:00 EST. Please see our terms for use of feeds.

Bank of America Corp.'s

Legendary money manager Bill Miller, who raised his Legg Mason Value Trust fund's stake in Countrywide to 15% and could buy as much as a 25% interest, said in a letter distributed to the press that he was "quite surprised by the decision to sell the company at close to a seven-year low in the stock price, and agreeing to a bid that amounts to only 30% of book value." Predictably, Bank of America disagrees with Miller. A company spokesman told Bloomberg News that "we believe it is fair for both companies."

Continue reading Countrywide's $4 billion sale to Bank of America displeases Legg Mason

Countrywide's $4 billion sale to Bank of America displeases Legg Mason originally appeared on BloggingStocks on Tue, 12 Feb 2008 16:10:00 EST. Please see our terms for use of feeds.

Bill Miller, the investment guru at Legg Mason Capital Management, has published a letter to his shareholders. Keep in mind that his firm is the number two owner of Yahoo! Inc. (NASDAQ: YHOO) shares.

So what's his take on the $44 billion buyout offer from Microsoft Corp. (NASDAQ: MSFT)?

Well, it should be no surprise that Miller thinks the offer is under the fair value. In fact, he says that it appears that Microsoft "had been prepared to pay over $40 per share previously."

That would certainly be nice for Miller's shareholders. But, is it realistic to expect that Microsoft will bid against itself?

Continue reading Bill Miller riffs on Microsoft's battle for Yahoo

Bill Miller riffs on Microsoft's battle for Yahoo originally appeared on BloggingStocks on Tue, 12 Feb 2008 15:55:00 EST. Please see our terms for use of feeds.

Continue reading Legg Mason's Bill Miller reshapes his portfolio strategy

Legg Mason's Bill Miller reshapes his portfolio strategy originally appeared on BloggingStocks on Mon, 05 Nov 2007 14:28:00 EST. Please see our terms for use of feeds.

The old Wall-Street adage of buying stocks when there is "blood in the streets" couldn't be more appropriate than now. With financial stocks getting pummeled every day, and home-builders in a slump of more than a year and a half, smart money is going to start loading up on these names. In fact, none other than investing guru Bill Miller, the veteran manager of Legg Mason Value Trust, said as much in a note to investors.

Regarding the financials, I know that dividends may get cut, that we may see the subprime mess spread to credit card companies, that we may see even larger write-offs in quarters to come. But I also know that these same institutions will be around five years from now, and they will be much leaner, more profitable operations than they are today. Financial giants like Citigroup (NYSE: C), Merrill Lynch (NYSE: MER), Goldman Sachs (NYSE: GS), and even E*Trade (NASDAQ: ETFC) are getting awfully cheap according to any normative ratio, and should be seriously looked at.

As for home-builders, I am aware that the real-estate market stinks, but I also know that the smart money is beginning to move into communities where prices have been the hardest hit, and they are buying up projects at $0.75 on the dollar. Look for companies like Toll Brothers (NYSE: TOL) to be attractive long-term investments.

Take a shot, let it sit, and check in three years and see just how much money you made.

Disclosure: Writer holds a position in ETFC. He has no other position in any stock mentioned as of 11/4/07.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com.

Now is the time to step up and buy financials and home-builders originally appeared on BloggingStocks on Sun, 04 Nov 2007 14:10:00 EST. Please see our terms for use of feeds.

Amazon (NASDAQ: AMZN) closed at $93.38.

• AMZN overall option implied volatility of 45 is above its 26-week average of 39 according to Track Data, suggesting larger price risks.
  
• www.Amazon.com operates retail websites.

Borders Groups (NYSE: BGP) recently closed at $13.10.

• Dow Jones reported: "Spencer Capital Management LLC, which holds a 7.9% stake in BGP, said Thursday that it has asked the book retailer to add a person designated by Spencer to its Board."
  
• BGP over all option implied volatitliy of 48 is above its 26-week average of 37 according to Track Data, suggesting larger price risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Option update: Amazon (AMZN) near record high; Borders (BGP) near record low originally appeared on BloggingStocks on Fri, 28 Sep 2007 09:45:00 EST. Please see our terms for use of feeds.

For some reason stock trading is still running rampant in the market despite all the evidence to the contrary that it is a bad idea. It is a bad idea to pay fees and taxes (or take losses, even worse) no matter how low because they eat away at your overall returns. It is a bad idea because the basis of the decision to buy or sell has little or no fundamental rationale except momentum, or charts, or news of the day, or analysts' calls, or a Cramer rant. But most importantly to me it is a bad idea because all of the most successful and wealthiest investors do the opposite -- Warren Buffett, Bill Miller, Eddie Lampert and Carl Icahn just to name a few.

Since history has proved over and over and over that day trading is a loser's game, why do it? The only reason I can think of is for the adrenaline rush. It's the sport of it. Just watch Cramer and you can see the crazed sports fanatic looking for a fix. He makes it exciting! He makes it an adventure! He needs something to talk about!

If he followed a process enjoyed by Buffett or Miller his show might be on the air monthly instead of several times a week. Instead of frantic or manic gyrations he would be making a few boring comments and calm suggestions about a few stock possibilities before encouraging his viewers to tune in next month. Cramer and other traders have built up business as a sport and as entertainment. But, if you want to get rich, follow the investors not the traders.

Continue reading Rapid fire trading is more sport than investing

Rapid fire trading is more sport than investing originally appeared on BloggingStocks on Mon, 09 Jul 2007 16:30:00 EST. Please see our terms for use of feeds.

Poor Bill Miller. After seeing his Cal Ripken-esque 15-year streak of beating the market end in 2006, he's trailing the S&P 500 again in 2007. His investors at the $21 billion Legg Mason Value Trust were probably content to laugh off the end of his run, but another off-year in 2007 could raise some eyebrows. Is Bill Miller finished, some will ask? Or, can he make a comeback amid mounting pressure to deliver returns to shareholders?

When asked about whether his amazing run was just a fluke, Miller replied by pointing out that the odds of beating the market every year from 1991 to 2005 are about 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 U.S., so you never know."

I wouldn't give up on Bill Miller just yet. He's one of the greatest investing minds ever, and I would look for him to regain his form. And if he doesn't? Well then he just be another member of the 90% of mutual fund managers who don't beat the market.

Bill Miller's Mason Value Trust still trailing behind the markets originally appeared on BloggingStocks on Tue, 03 Apr 2007 16:23:00 EST. Please see our terms for use of feeds.

Bill Miller's letter to shareholders originally appeared on BloggingStocks on Fri, 26 Jan 2007 13:10:00 EST. Please see our terms for use of feeds.

• 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%

Housing: To go long or to go short? originally appeared on BloggingStocks on Thu, 04 Jan 2007 10:01:00 EST. Please see our terms for use of feeds.

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.

Despite an off year, Legg Mason's Miller is still the man originally appeared on BloggingStocks on Fri, 29 Dec 2006 12:59:00 EST. Please see our terms for use of feeds.

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.

Hallucinations about Yahoo! originally appeared on BloggingStocks on Tue, 12 Dec 2006 13:46:00 EST. Please see our terms for use of feeds.

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.

Legg Mason's Bill Miller doubles down on Amazon.com originally appeared on BloggingStocks on Sun, 29 Oct 2006 22:04:00 EST. Please see our terms for use of feeds.