Miller looks for fund to rebound

Legg Mason manager hopeful on housing, financial markets

Miller said the credit panic ended with the near-collapse of Bear Stearns Cos. and its subsequent bailout by JPMorgan Chase & Co.

Value Trust's position in Bear Stearns dropped drastically, though. It began buying up Bear Stearns between July and September and increased its stake to 2.3 million shares as of Dec. 31. But the fund also held a position in JPMorgan, which Miller noted was three times larger than Bear Stearns. JPMorgan constituted 5 percent of Value Trust's portfolio assets as of March 31.

"Credit spreads are already much improved since then. If spreads continue to come in, the write-offs at the big financials will end, and we may even have some write-ups in the second half instead of write-downs," he said.

Miller, who said investors are right to expect better returns from his fund, remains bullish on the stock market.

He repeated his opinion in his earlier letter to shareholders that financial and consumer stocks have hit bottom and noted that housing stocks are up despite bad headlines.

"With most investors being fearful, I think it makes sense to allocate some capital to the greedy side of that pendulum, and that means putting more cash to work in equities," he said.

Shares of Legg Mason rose 97 cents, or 1.7 percent, to close at $59.04 in trading on the New York Stock Exchange yesterday.

[e-mail]