William H. Miller III, manager of the $14 billion Legg Mason Value Trust fund, said he might buy shares of Google Inc. during the company's stock-sale auction, depending on the price.
Miller, whose fund has outperformed the Standard & Poor's 500 Index for a record 13 years, declined to reveal how much he would bid during the initial public offering. Google, the world's most-used Internet search engine, is worth between the market value of Amazon.com Inc., about $18 billion, and the market value of eBay Inc., about $57 billion, Miller said.
"We will bid what we think it's worth," Miller said at a luncheon meeting with reporters from the New York press at Legg Mason Inc.'s Baltimore offices. "I don't know what our answer will be, but I have a sense of what the business is worth."
Miller's fund is down 2 percent this year, lagging the 0.3 percent advance of the S&P 500. Last year, the Legg Mason fund rose 44 percent, beating the U.S. benchmark stock index by more than 15 percentage points as the value of its stakes in Amazon.com and Nextel Communications Inc. more than doubled.
Miller is different from the typical value investor like 79-year-old Martin Whitman, who manages the $3.3 billion Third Avenue Value Fund and focuses solely on companies trading at low prices relative to cash flow and assets. Miller has bought many such companies, including Eastman Kodak Co. and Tyco International Inc., but he also buys shares of companies trading at above-average multiples that he expects to grow even faster than expected, such as Amazon.com. In the first quarter, he bought 8 million shares of Electronic Arts Inc., the biggest video game maker, after the shares almost doubled in price last year.
Legg Mason's previous investments in Internet companies such as Amazon.com, eBay and Yahoo Inc. will help Miller decide how much Google is worth. "We have as much invested in these type of businesses as anybody," he said.
Two units of Legg Mason owned a combined 49.5 million shares of Amazon.com at the end of March, the most of any Amazon.com investor except Jeff Bezos, president and chief executive of the online retailer.
Miller said an analysis by Jack Ciesielski, publisher of the Analyst's Accounting Observer newsletter, has Google's value "about right." Ciesielski, who once worked as an analyst for Miller, said Google appeared to value its shares at $80 to $90 each, making the company worth $21.7 billion to $24.6 billion.
Google's stock sale will take a different approach from the typical Wall Street IPO. Google plans to auction shares, letting investors use the Internet, telephone or fax to let underwriters know how many shares they wish to buy and the price they are willing to pay.
Miller also said he's sticking with a forecast he made in December that stocks will gain as much as 15 percent this year.