Bill Miller

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Bill Miller and Value Trust

Value Trust has surpassed the S&P 500 by an average of 3.67% for the previous fifteen years. Value Trust also maintained Morningstar’s five star rating. Mutual fund investment performance can be measured by finding out its net asset value and Annual Total Return. Net Asset Value can be computed as the fund’s total assets minus the liabilities divided by funds shares outstanding. Annual total return can be measured by the increase or the decrease in net asset value plus the fund’s income distribution. These are used to find the measure of the percentage of annual growth rate of net asset value assuming that reinvestment, and the absolute dollar value today of an investment made at some point in the past. Good performance would require the investment to provide a measurable reward-to-volatility trade-off and to consistently outperform the major markets such as the S&P 500 and Russell. Miller’s methodology includes buying low-price, high intrinsic-value stocks, researching areas of the market that look least promising, the lowest average cost wins, high price stocks can still be good (Wal-Mart and Microsoft), think long-term and anticipate rather than reacting, mixture of cyclically underpriced stock and secularly underpriced stock, be aggressive when stocks are low and less when stocks are high, and finally they must be able to take risk for huge gains. His methodology takes into account behavioral finance. He looks forward to the market’s overreaction to news and adjusts his investments accordingly. He also looks for distrust in the market. Small differences in choosing a benchmark against which to compare returns can cumulate to large apparent abnormalities in long-term returns. It will be extremely more difficult to continue this record as more money is invested into this fund because the few companies that compose funds only have…...

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Bill Miller and Value Trust

...Bill Miller and Value Trust outperformed the Standard & Poor’s stock index from 1991 to 2005. I used the S & P 500 Index benchmark to make that assessment. Mutual Fund investment performance or Annual total return can be measured as the increase or decrease in net asset value plus the fund’s income distributions. Net asset value is computed as the fund’s total assets less liabilities, divided by the number of mutual fund shares outstanding. Another way to measure investment performance is to use the internal rate of return (IRR). This gives you the periodic rate of return at which your invested dollars produce the investment results you see at the end of the period. Good performance means that the investment would have to provide returns necessary to meet an individual’s goals. Mutual Funds investments don’t have to beat a specific benchmark to be successful. Bill Miller was able to make consistent abnormal trading profits which would explain the fund’s performance. Mutual funds are also likely to outperform the S & P Index when small firms outperform large ones and underperform when small firms experience worse. Miller’s investment strategy explains his good performance to a small extent but most of his success in beating the market was luck and market timing. His portfolio is diversified compared to an individual stock portfolio. He buys and holds stocks with a turnover rate of 9% compared to a typical fund’s turnover rate of 85%. He usually holds on to winning stocks......

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Bill Miller

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Bill Miller Analysis

...Bill Miller and Value Trust Case Analysis Case Facts: 1  By middle 2005, Leg Mason Value Trust managed by Bill had outperformed S&P 500 index for 14 years in a row. This was longest successful run by any fund manager.  The average return on the fund was 14.6% which surpassed the S&P by 3.67% per year.  The value trust only had 36 holdings, 10 of which accounted for 50% of the fund’s assets.  No manager had matched Miller’s consistent index beating record.  Miller’s results were in contradiction to the conventional theory which suggests that it is extremely difficult to beat the market on a sustained basis as it is characterized by high competition, easy entry and informational efficiency. Problem Statement:  The Lag Mason Value Trust has been able to outperform the S&P 500 index for 15 consecutive years till 2005. Will the trust to able to consistently deliver similar performance in future?  Should a rational investor buy shares in Value Trust as on middle of 2005?  What can be possible reasons for the exemplary record of the Value Trust?  Can the reasons of the trust’s success can be only attributed to the trading skills and style of Bill Miller or is it sheer luck? US Mutual Fund Market:  The mutual fund market in the US has seen exponential growth in the last 30 years. The numbers of mutual funds have increased from 361 to 8,044 in between 1970 to 2005.  By 2004, Mutual fund owned nearly 20% of the outstanding stocks of US companies.  The value......

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Bill Miller

...1. How well has Value Trust performed in recent years? In making that assessment, what benchmark(s) are you using? How do you measure investment performance? What does good performance mean to you? Bill Miller is a fund manager who has set a new pace in the financial markets. His firm has been on a winning streak for a record time of 14 years. In recent years, the markets were bearish yet Miller’s firm was able to not only surpass the S&P 500 mark but consistently have positive returns. He has a consistent index-beating record that is unmatched. The United States fund market is the largest in the world. The aggregate figures are an abstract reflection of the consistent growth of mutual funds investment. Majority of the people that own mutual fund investments in the 21st century comprise of nearly half of the households in the United States. This is a great increase from the 1980s where only 6% of the population had mutual-fund assets. Investment performance is measured based on its efficiency, returns and risk involved. Mutual funds enable the investor to diversify their portfolio without necessarily injecting a huge sum of money into the fund. This makes this investment efficient. Over the years, mutual funds have had good returns. The industry provides the investor a place where he can safeguard his investment from harsh market forces. As such, the investor is assured of making some gains from his investment. The fact that an investor does not have to actively...

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Miller

...683037 | 746491 | 717016 | 3.) Baumol Model assumes that the cash inflow is constant. Both equations find the optimal cash balance, but the Miller-Orr model goes a step further and finds the average cash balance. Miller-Orr gives a more accurate depiction of the optimal cash balance because it takes into account the upper and lower limits for the cash balance. A substitute for the baumol model could be the EOQ model because it finds a better target cash balance. 4.) If it was the minimum, we would be charged with a penalty, whereas if it was only an average, there is more flexibility. 5.) Baumol model= 78.76         Miller-Orr =   70.07 The range they consider normal is between 55 and 70, so only the Miller-Orr model fall into this range. 6.) A few changes that we recommend in our firm’s cash management is to either synchronize our cash flows, use a lockbox plan, or make payments by wire.  Synchronizing Cash flows: Synchronizing cash flows helps to improve their forecast by timing cash receipts to coincide with cash requirements, so that our liabilities are kept to a minimum. Lockboxes: An older form of cash management that allows you to have a lockbox in a bank in another state that makes receiving money quicker than having it sent across the country. Payments by Wire: Ultimate sped up process easily transferring larger bills from one account to another quickly and safely. 7.)     Baumol model: Required Balance | Avg Balance | Cash Turnover | 0 |......

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Bill and Miller Value Trust

...Bill   Value Trust is a mutual fund that has performed well against various indexes in the years leading up to 2005. Value Trust takes S&P 500 as its benchmark index, which it has outperformed for the last 14 years. Prior to 2005, Value Trust had an average annual total return of 14.6%, which was 3.67% higher than S&P 500’s average annual returns. From exhibits 1 and 5 we can see that the return was much higher for Value Trust (15.04%) compared to the S&P 500 (9.48%) over a ten year period. The NAV was consistently increasing from 1994 to 2000 up until the market crash when the NAV decreased but then again increased consistently until 2004. The NAV is an investment measure and increase indicates a better performance. Also from exhibit 1 we can see that the annual return of Value Trust was higher than the S&P 500’s over the years. According to the case Value Trust uses S&P 500 however we should make some analysis on what kind of shares S&P 500 deals with versus what kind of shares Value Trust deals with. S&P comprises of 500 widely held common stocks in other words large cap stocks. On the other hand 50% of Value Trust’s assets were of only 10 large cap companies and Value Trust was open for investing in growth companies. This made the beta of Value Trust (1.31 as taken from Exhibit 1) higher than S&P’s beta indicating that Value Trust is riskier. In this case to make the benchmark more comparable to Value Trust we chose to use other benchmarks, such as the S&P 400 mid-cap....

Words: 1587 - Pages: 7

Miller

...of Leverage The tradeoff theory assumes that there are benefits to leverage within a capital structure up until the optimal capital structure is reached. The theory recognizes the tax benefit from interest payments - that is, because interest paid on debt is tax deductible, issuing bonds effectively reduces a company's tax liability. Paying dividends on equity, however, does not. Thought of another way, the actual rate of interest companies pay on the bonds they issue is less than the nominal rate of interest because of the tax savings. Studies suggest, however, that most companies have less leverage than this theory would suggest is optimal. (Learn more about corporate tax liability in How Big Corporations Avoid Big Tax Bills and Highest Corporate Tax Bills By Sector.) In comparing the two theories, the main difference between them is the potential benefit from debt in a capital structure, which comes from the tax benefit of the interest payments. Since the MM capital-structure irrelevance theory assumes no taxes, this benefit is not recognized, unlike the tradeoff theory of leverage, where taxes, and thus the tax benefit of interest payments, are recognized. In summary, the MM I theory without corporate taxes says that a firm's relative proportions of debt and equity don't matter; MM I with corporate taxes says that the firm with the greater proportion of debt is more valuable because of the interest tax shield. MM II deals with the WACC. It says that as the......

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Miller

...Explore the ways in which miller creates suspicion from the moment Hale enters to the end of act one. Miller uses a number of devices such as stage directions, repetition and word choice that indicate suspicion of others and witchcraft among the Salem people. Arthur Miller uses stage directions in to create a sense of suspicion and mystery [Be Precise – state page number/Act]. With Reverend Paris, Miller did this to emphasise the character’s main dilemma in the play which is the threat to Paris' power in the community as his niece as people would be suspicious of her. Therefore because she is living under his roof, it would put a bad name on Paris as he couldn't keep his house Holy [Mention – by Miller setting the scene in a reverend’s house (a place of God), the audience may be more suspicious of the witchcraft.]. The stage directions used at the start if act one when Paris is praying frequently over Better [?] his daughter indicates that the room is quite dark with only a candle burning and sunlight through the window lighting the room. The significance of this is to show how the audience that the stage direction, builds tension to the atmosphere and sets the mood for the play [Good Holly]. Paris is frightened and confused by Betty's illness, wondering what he has done wrong to deserve this. He is angered quickly without provocation, for example when Tituba inquires about natty he turns on her in fury and shouts to get 'out of here.' Therefore not......

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Miller

...Global Perspectives on Investment Management LEARNING FROM THE LEADERS Conversation with a Money Master BILL MILLER, CFA with FRED H. SPEECE, JR., CFA Bill Miller, CFA, is chairman and chief investment officer at Legg Mason Capital Management, Inc., and was named ‘‘The Greatest Money Manager of the 1990s’’ by Money magazine. In this question and answer session, Fred H. Speece, Jr., CFA, interviews Bill Miller about his insights into portfolio management in general and value investing in particular. Continuing a tradition of lifelong learning a cfa institute publication Conversation with a Money Master BILL MILLER, CFA Bill Miller, CFA, is chairman and chief investment officer at Legg Mason Capital Management, Inc., and was named ‘‘The Greatest Money Manager of the 1990s’’ by Money magazine. In this question and answer session, Fred H. Speece, Jr., CFA, interviews Bill Miller about his insights into portfolio management in general and value investing in particular. Speece: You have an impressive long-term track record as a portfolio manager. Given today’s very efficient and sophisticated market, do we still have room for stock picking? Miller: When we discuss market efficiency, we run into a semantic issue about what exactly is meant by the term ‘‘market efficiency.’’ At Legg Mason, we believe that the markets are pragmatically efficient, which means that they are extremely competitive and usually beat most active managers. For example, fewer than 35 percent......

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Scared to Death: the Role of Fear in Miller Williams’ “Thinking About Bill, Dead of Aids.”

...Anne Carson once said “I wanted to find one law to cover all of living. I found fear.” Miller Williams’ poem “Thinking about Bill, Dead of AIDS” expresses specific ways in which fear impacts a person when faced with a painful situation, regarding HIV/AIDS in particular, when articulating the experience of the speaker losing a loved one to AIDS. When it comes to human suffering and overcoming affliction, fear prevents one from surviving, understanding, and accepting the tragedy in which they are suffering from. To start, Miller Williams’ poem, “Thinking about Bill, Dead of AIDS,” begins with looking at the concept of suffering in a physical sense, rather than in its emotional form, We did not know the first thing about how blood surrenders to even the smallest threat when old allergies turn inside out, the body rescinding all its normal orders to all defenders of flesh, betraying the head, pulling its guards back from all its borders (Williams 1-6) The stanzas illustrate that the body is unable to relieve a person from the pain that is being inflicted upon them. When the sickness is too severe, fear takes over the body and, as Williams described the action in the poem, “surrenders” to the illness (Williams 2). Fear can penetrate much deeper than the mere imagination of the human mind. When one is paralyzed by stage fright, or rendered speechless when faced with the task of delivering heart wrenching truth, that is only the surface of the water. The poem illustrates......

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Miller

...Health Service Grant MH-19604, National Science Foundation Grant SOC-74 12063, and a Guggenheim fellowship to Martin Seligman. We thank Lauren Alloy, Judy Garber, Suzanne Miller, Frank Irwin, S. J. Rachman, and Paul Eelen for their critical comments on earlier drafts of this paper. Ivan Miller (Note 1) has proposed an almost identical reformulation. We believe this work to have been done independently of ours, and it should be so treated. Requests for reprints should be sent to Martin E. P. Seligman, Department of Psychology, University of Pennsylvania, 3815 Walnut Street, Philadelphia, Pennsylvania 19174. 1967). Paralleling the experimental findings with dogs, the debilitating consequences of uncontrollable events have been demonstrated in cats (Masserman, 1971; Seward & Humphrey, 1967; Thomas & Dewald, 1977), in fish (Frumkin & Brookshire, 1969; Padilla, 1973; Padilla, Padilla, Ketterer, & Giacolone, 1970), and in rats (Maier, Albin, & Testa, 1973; Maier & Testa, 197S; Seligman & Beagley, 1975; Seligman, Rosellini, & Kozak, 197S). Finally, the effects of uncontrollable events have been examined in humans (Fosco & Geer, 1971; Gatchel & Proctor, 1976; Glass & Singer, 1972; Hiroto, 1974; Hiroto & Seligman, 1975; Klein, Fencil-Morse, & Seligman, 1976; Klein & Seligman, 1976; Krantz, Glass, & Snyder, 1974; Miller & Seligman, 1975; Racinskas, 1971; Rodin, 1976; Roth, 1973; Roth & Bootzin, 1974; Roth & Kubal, 1975; Thornton & Jacobs, 1971; among others). Hiroto's experiment......

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Bill Miller

...For example, Bill Miller’s Legg Mason Value Trust (ticker: LMVTX), a mutual fund that has beaten its benchmark (the S&P 500 index) in each of the last 14 calendar years, routinely holds stocks that have seen their prices drop substantially recently. In making that choice, Miller essentially selects stocks that appear to be in trouble, but are ones for which the market seems to have overreacted—he invests “where there is fear.”1 growth and value Rather, we simply point out that doing so exposes us to greater risk and requires us to conduct much more extensive analyses. We are reminded, however, of a quote from Mark Twain, “Put all your eggs in one basket and—WATCH THAT BASKET!”8 An advantage of holding fewer stocks is that it is easier to monitor them, but, in general, we must be extremely confident of our analyses in order to hold so few stocks he tends to select the stocks of companies that are financially sound. Where Miller deviates from many other fund managers is that he often chooses stocks that have been beaten down in recent months/years. This provides us with another lesson. In the aftermath of the Dennis Kozlowski scandal, the stock of Tyco (TYC) dropped from $60 to nearly $8. Miller believed that the scandal had little (if anything) to do with the company’s core business model, so he bought heavily. The stock has since rebounded to the mid $30s, giving Miller a sizable return on his investment. Miller describes this as buying “where there is fear.”2 The......

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Bill Miller

...The submitted assignment will automatically undergo a similarity check. If plagiarism is detected, marks would be deducted as follows:    Assignments with 16 - 30 % overlap with others: 20% deduction from the total marks scored. Assignments with 31 - 50 % overlap with others: 40% deduction from the total marks scored. Assignments with more than 50% overlap with others: Zero mark would be given. ASSIGNMENT QUESTION PURPOSE The purpose of the assignment is to introduce the novice to the structure of the U.S. capital markets. Learners are also expected to assess the performance of the fund, consider the sources of that success, and to decide on the sustainability of Miller’s performance. REQUIREMENT Based on the Bill Miller and value trust case study, answer the following questions: (1) How well has Value Trust performed in recent years? In making that assessment, what benchmark(s) are you using? How do you measure investment performance? What does good performance mean to you? (2) What might explain the fund’s performance? To what extent do you believe an investment strategy, such as Miller’s, explains performance? (3) How easy will it be to sustain Miller’s historical performance record into the future? What factors support your conclusion? (4) Consider the mutual fund industry. What roles do portfolio managers play? What are the differences between fundamental and technical securities analysis? How well do mutual funds generally perform......

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Bill Miller

...Summary of the case: Billy Miller, who manages the Value Trust Fund, consistently leads his company to beat the mutual fund market for 14 years. This remarkable outcome is viewed as impossible mission by those economists and financial analysts. Is this a pure luck or Bill Miller has some unique strategies to run the company? Miller said: “Maybe it’s not 100% luck. Maybe 95% luck.” If it is just lucky to achieve the result in today, should we invest our money into this fund? Or we should do a detailed analysis before we make a decision. Problem No.1 Define the problem of the case: Is Value Trust a good company to invest? 1) What is mutual fund? What does it do? 2) How is the market of mutual fund? Is it doing good or bad? 3) How is the Value Trust Company doing compare to others? 4) What is market prospective of mutual fund and how does it fit with Bill Miller’s strategy? 5) Is Bill Miller lucky to get the prominent result or he owns certain investment skills 6) Should we invest? Market Analysis: Mutual Fund market was the largest in the world. It serves several economic functions for investors, afforded the individual investor the opportunity to diversify his/her portfolio efficiently without having a large amount to achieve the efficiency; a higher return could be earned by investor who has professional expertise compare to securities; Isolating individual investor and the painful vicissitudes of the marketplace. With these advantages,......

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Bill Miller, Value Trust

...The purpose of this paper is to give a peer review of the presentation team’s performance. The topic covered by the team was the role of financial market efficiency in corporate finance and its relevance to fund manager Bill Miller, Value Trust, and potential investors. We will look at the following areas in assessing the performance of the presentation team: ■ The value of supplemental readings ■ Quality and content of the concept lecture ■ Quality of the case analysis ■ Strength of the case recommendation ■ Presentation and communication skill Value of Supplement Readings The analysis team recommended the following additional readings: Chapter 8 of Brigham/Ehrhardt’s “Financial Management” textbook, Burton Malkiel’s “Reflections of the Efficient Market Hypothesis: 30 Years Later”, and Malkiel’s “Passive Investment Strategies and Efficient Markets”. All three recommendations are excellent sources for basic and advanced understanding of the case’s key financial concepts. “EMH: 30 Years Later”, especially, is a terrific read providing the original EMH founder’s thoughts on the theory’s relevancy even in today’s financial world. We also would like to recommend two academic papers that offer inquisitive views of EMH and its potential fallacies. Both works - Daniel Kahneman’s Nobel prize work “Maps of Bounded Rationality” and Lawrence, McCabe, and Prakash’s “Answering Financial Anomalies: Sentiment-Based Stock Pricing” - explore the realms of behavior finance. By......

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