Blasphemy and Bill Miller

Did you see the Bill Miller segment on CNBC Tuesday morning? If not, you can click through and watch it here. He is not on very often, very rarely in fact, but (and here comes the blasphemy) the more I hear or read from him the less impressed I am.

He made a comment yesterday about when he first bought Amazon (AMZN) at around $80 in the late 1990s before it, unfortunately, went down to $6. The way he lamented I took to mean that he sold none on the way down to $6. Obviously, they bought more; he said the average price now is about $9 so it is up a ton from that average.

We know that during the financial crisis he again held onto a lot of the wrong names for far too long, names like Freddie Mac (FRE) and Citigroup (C), according to this link, and AIG (AIG), Bear Stearns, Wachovia, Washington Mutual and Countrywide according to this link. I weighed in on Miller a little over a year ago.

In looking at the chart for the last decade it looks as though the decline has more than offset all those years of outperformance, however that is not quite right. Adding in the dividends (per Yahoo Finance) the fund is down 17.22% over ten years while the S&P 500 was down 21.1%. So, for the decade it beat the market by about 0.38% annualized but took anyone who held for the entire ten years on a sickening ride. (Click to enlarge)

If you got in after those first two dividends, however, then you did much worse over the last nine years, losing 18.47% (including the dividends reported by Yahoo) versus losing 13.18% for the SPX. The numbers appear to get worse as you go shorter on the chart. Even after a great 2009, the fund has trailed the S&P by a lot over the last two years.

The second chart (down below, which you can click on to see better) is from Morningstar and is for the life of the fund. My understanding is that Morningstar charts show total return, including dividends. For a little while right before the bear market started the fund was way, way ahead of the S&P 500, but that outperformance has been almost completely given back because of how Miller navigated the recent decline.

Part of his issue was summed up in something he said toward the end of his visit to CNBC yesterday, in which he cited a fund company called Manning and Napier with an eleven year streak of beating the market. He said he saw a quote from someone there who said it will be a relief when the streak is over. Miller's reaction was: "So what you're saying is you want to underperform? That doesn't make any sense to me." He said his streak was not important but outperforming and adding value to clients is important.

I have no idea who Manning and Napier are (not a slight) but he does because they have a streak going and he read something about their streak. How is this evidence of anything but a massive ego? Given that Miller seems to have no sell discipline, it would appear that his ego gets in the way of running the fund. Do a search for articles about him back from when the stocks mentioned above were only cut in half and before most of them totally crapped out. See for yourself what he was saying. Essentially the market was wrong. I wonder how many fund holders feel like he has added any value recently.

In my previous post on Miller there is a similar story about an interaction he had with Chris Davis. There is a saying about bull markets making geniuses out of people. Does anyone think this might be the case here? It is a reasonable question.