Bill Miller's streak stops at 15 years

Standard & Poor's 500 stock index outperforms Legg manager at last

S&P by a nose

December 30, 2006|By Laura Smitherman | Laura Smitherman,Sun reporter

In the end, the market beat money manager Bill Miller by 10 percentage points.

Miller, who manages the Value Trust mutual fund at Baltimore-based Legg Mason Inc., has outperformed the market as measured by the Standard & Poor's 500 stock index for 15 consecutive years.

But his quest to extend "The Streak" came to a close yesterday, when the fund ended the year with a 5.9 percent return, well below the S&P's 15.8 percent gain, including reinvested dividends.

The streak has garnered publicity and investors for Legg Mason and Miller, whose unrivaled record made him recognized as one of America's best stock pickers.

Miller could not be reached for comment yesterday, but he has said repeatedly that the streak is merely an "accident of the calendar."

As it turned out, 2006 was a tough year for many top money managers.

Manu Daftary of Quaker Strategic Growth fund, with the second-best track record, also trailed the benchmark. He had beaten the S&P 500 for eight straight years.

Miller and his underperforming cohorts could have fallen victim to a theory called Dunn's Law, named for portfolio theorist Steven Dunn.

That maxim holds that indexes deliver superior results in "up" markets but funds that are actively managed are more likely to beat a bear market.

Indeed, there is always next year.

Miller is bullish on the market for 2007, including several of the sectors where he is heavily invested.

And he prides himself on being introspective enough to try to compensate for what Warren E. Buffett's right-hand man, Charlie Munger, called the "psychology of misjudgment."

"We make plenty of mistakes," Miller wrote recently. "We just hope they are mostly new ones."

laura.smitherman@baltsun.com

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