Investment guru Bill Miller says it's safe to come out of the bushes — the bears have been contained.
“The worst has passed in the market and the economy,” Mr. Miller wrote in his latest quarterly commentary to investors. The longtime manager of the Legg Mason Value Trust fund, best known for beating the S&P 500 an unprecedented 15 years in a row until 2005, cites his own set of leading indicators: Bull markets begin, he explained, “when the economy is bottoming, profits are bottoming, the Fed is stimulating and valuations are low. That's where we are now.”
And he is adamant that “bargains abound” in the U.S. stock market, mostly because assets in money market funds exceed assets in stock funds for the first time in 15 years. All that cash, he argues, will “gradually move out in search of better returns.”
While the second half of this decade has not been good for Mr. Miller, especially last year's 55% loss in his Value Trust portfolio, he's making a case for himself this year. Value Trust soared 29% in the second quarter, giving it a 14% return for the year so far, once again clobbering the S&P 500, up 3.2% year-to-date.
How did Mr. Miller do it? By investing in — and sticking with — the tech and financial stocks that hammered him so horribly last year. They became “very cheap and deeply oversold,” he wrote, “and began to rebound as it became clear that financial Armageddon had been avoided.”
One of those stocks is New York City-based CA Inc., which, despite a 24% tumble last year, remains Mr. Miller's sixth-largest holding at Value Trust. The business software maker's share price last week was around $20, vs. $18 in December.