Question 5 (B)
Bill Miller had proved that he is one of the greatest fund manager ever by outpace S&P 500 14 years straight. He also had bring Value Trust become one of the biggest fund management company with revenue, $ 636 billion. He successful becomes “superhuman” because of his investment philosophy that he believed with. “The value of a company is the sum of the present value of its future cash flows. (Legg Mason profile, 2008)” It is all about how the company use their cash and intelligent to create their business model. It is not longer about accounting profit that creates shareholder value; it is about how the company uses the cash to have future cash flows. For example, Dell is one of the company where Bill Miller’s investment. Dell had gained more than 1000 percent in 3 financial years. Bill Miller had invest in Dell because of his understanding about business model that technology will skyrocket the share price, and sold it just before the technology bubble burst. Dell had used its cash to develop its product and the way to reach their customers that bring high future cash flows. Bill Miller had succeed to see this situation as opportunity and sold it just before threat come.
Second Bill Miller’s philosophy is “Although markets broadly reflect company values, mispricing occur. (Legg Mason profile, 2008)” Market is a complex adaptive system from Bill Miller’s view that normally efficient and has quick respond to new information. However, diversity such as participant, views and objectives is needed to make the market remain efficient. The market diversity occasionally breaks down, and will make mispricing occur. The diversity usually break down because of behavioral anomalies where investor will feel fear, panic or become greed or business model misunderstanding. Bill Miller and his team still make a lot of research in indentify and exploit of this situation (mispricing). The philosophy is proved in the “financial bubble” situation, from Bill...
Please join StudyMode to read the full document