Finance Case Study Bill Miller

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Ivanna Olivieri
4 February 2013

Bill Miller an Value Trust

Bill Miller manages Value Trust, a Mutual fund that has been extremely successful. It has outperformed its benchmark the Standard and Poor’s 500 for 14 years. It has earned a cumulative return of more than 830% over those 14 years. Bill Miller has a rather different approach to making his investments. He goes against the conventional ways of thinking. He buys stocks when prices are its prices are going down, when the market is pessimistic, and when they have low average cost, and recognizing undervalued stock.

This makes a lot of people skeptical of the Efficient Market Hypothesis which says that a stock price takes into account all the public information, company information, economy information and past prices of the stock. Some might say that that is not the case that stock prices are actually guided by emotions of the investors.

Bill Miller takes into account human emotions when doing his investments. He recognizes that when a stock price goes down by a lot, and it’s a high value stock it is probably an overreaction and he knows that the price of that stock will go back up again. This gives him a chance to make a profit over a short time. Bill Miller is a great investor, but even he recognizes that he has lucked out. He is only one of many investors, one of them was bound to get lucky in the stock market and that is the one that we hear about. Value Trust does a lot of research, to see which stocks are undervalued, which stocks have promising outlooks the ones they sell, and which have poor outlooks, the ones they buy. Their research is pretty accurate because their predictions are correct.

I think Bill Miller proves that the Efficient Market Hypothesis does not do a very good job predicting how the market will behave. Some investors that do a technical analysis perform well on their portfolios, but other like Bill Miller that goes on a “hunch” perform even better. Whether it was...
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