New Fund Manager Champion?
Money manager Bill Miller, who runs Legg Mason Value Trust, is beating some of the investment records of revered mutual fund managers Peter Lynch and John Neff.
Miller’s fund topped the Standard & Poor’s 500 Index--the benchmark against which most U.S. stock fund managers are measured--in each of the last eight years.
It’s a winning streak longer than neither Lynch nor Neff, both retired, ever put together. Lynch’s best stretch at Fidelity Magellan Fund was seven years. Neff’s longest streak at Vanguard Windsor Fund was six years, which he did twice during the 32 years he ran the fund.
“Beating the S&P; as consistently as Miller is quite an accomplishment,” Neff said.
Miller is on his way to stretching his winning streak to nine. Legg Mason Value Trust--which despite its name invests in some companies that look pretty speculative--was up 14.5% so far this year at Tuesday night’s close. The S&P; 500 was up only 5.3% for the same period.
Miller’s record is even more remarkable considering that just one of every 10 money managers scored higher returns than the S&P; 500 during each of the past three years, analysts said.
Miller’s results were boosted in recent years by investments in tech stocks America Online, included in the S&P; 500 only this year, and Dell Computer, in the index since September of 1996.
“How can you be a value investor and own AOL?” Neff said. “I’m not questioning his skills. I’m questioning whether he’s a value investor.” Value investors typically seek under-priced stocks.
Miller, 49, says, “The issue is always where is the best value in the market.”
In some ways, however, Lynch is still the better performing mutual fund manager. For his entire 13-year run, Peter Lynch’s Magellan fund gained a cumulative 2,703.12%, vs. the 573.98% gain in the S&P; 500. On an average annual basis, that means he delivered gains of 29.2% a year (vs. 15.8% for the S&P;) for his 13-year run at the fund. He began running Magellan on May 31, 1977, and stepped down May 31, 1990. By comparison, Bill Miller has been running Legg Mason Value Trust for 17 years, since April 16, 1982. In the 17 years he has run the fund, through the end of May, the fund is up an average annual rate of 22.1%. Cumulatively, he’s up 2,848.72%.
But Lynch is retired and Miller is still managing, so Legg Mason Value’s assets are still rising--ballooning to $12 billion from $635 million since the end of 1990. More than $1.7 billion poured in during the first four months of this year, according to researchers at Financial Research Corp., a Boston-based firm that tracks fund flows.
Miller isn’t concerned by the inflows. He has been using the new money to increase investments in Bank One, Washington Mutual and Nextel Communications.
