Bill Miller of Legg Mason was regularly touted as an investment genius because of his beating of S&P 15 years in a row. His biggest story was his investment in Amazon.com. However, if you read the story right, he basically bought Amazon.com at its high, and kept doubling down when the share prices crashed. When Amazon.com rose back from its low, this behavior earned him great profits. This kind of story can only happen to mutual fund managers, as they keep getting continuous flow of new money from 401K to keep doubling down. For any normal investor or hedge fund manager, it would have been a road to disastrous results if they bought at the very high.
Nonetheless, the latest news for Bill Miller that raised great questions about his genius was his continual investments in Countrywide, Fannie Mae, Freddie Mac, AIG, and the like, in the last two years. A quick google on ‘bailout’, and you can tell how those investments had worked out for him.
However, while it’s difficult for most people to imagaine that those wonderful financial companies would have ended up with value of almost nothing, what prompted me to really notice Bill Miller was Yahoo. When Microsoft made a bid for Yahoo, and Carl Icahn moved in to try to shake up the board to make ways for the Microsoft/Yahoo deal, it was Bill Miller, a large shareholder of Yahoo, sided with management and blew the deal off. I don’t know what kind of return he was expecting, but to most investors, a $31/share bid over previous closing of $19/share was pretty good when the financial market was starting to crumble at the time. I just did not see how his action helped shareholders, or for his fund. Fast forward 9 months, now it seems like Yahoo is once again throwing Microsoft’s name in public as its share price dropped to ~$13/share, while its deal with Google is off. I don’t know how Bill Miller feels about this, but to me, what he did to Yahoo’s shareholders sums up how I think of Bill Miller as an investment professional.
