Bill Miller

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1.How well has Value Trust performed as of the date of the case? As of 2005, Value Trust had outperformed its benchmark index, the S&P 500, for 14 years consecutively. Given that the next longest period of sustained performance was only half as long, 14 consecutive years of excellent performance set a record as the longest streak of success for any manager in the mutual-fund industry. The average annual total return for the past 15 years was 14.6%, which was higher than the S&P’s 500 by 3.67%. Value Trust had 36 holdings, 10 of which accounted for nearly 50% of the fund’s assets. Morningstar gave Value Trust a five-star rating.

2.What might explain the fund’s performance?
Some observers attributed the success in fund’s performance to the fund manager’s conscious strategy of staying fully invested at all times rather than attempting to time the extent of market investments. Another popular explanation for the fund’s performance was the unusual skill of Miller, the funds’ portfolio manager. Miller followed a contrarian strategy, with several key elements. The main element was that he bought low-price, high-intrinsic value stocks. Miller’s approach was also research intensive and highly concentrated. Nearly 50% of assets were invested in just 10 large-capitalization companies. However, these 10 companies were in diverse sectors, such as telecom, health, industrial materials, utilities, and consumer. The diversification of the portfolio led to better returns.

3.What would Miller say in response to the claim that his success is luck? What is his investment style and how does it vary from other styles? Miller would partly agree with the claim that his success is luck. He does not disregard luck as part of his success and he even claims that while it may not be 100 percent luck, it could be as high as 95. He attributes much of the year to year success to the calendar and the way the months fall. However, he would also point out that on a purely random...
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