Thursday, February 15, 2007
Bill Miller's 4Q 2006 Commentary
At the end of 2006, one of the most talked-about streaks in value investing (heck, in any kind of investing) came to an end. Bill Miller's Legg Mason Value Trust failed to outperform the S&P 500 Index for the first calendar year since he took over sole management of the fund in 1990. Rumours about the end of the streak led to a lot of publicity and commentary and only added fuel to the fire when the firm announced in late October that they expected 2Q 2007 net income to come in below analyst estimates.
In the letter, Miller acknowledges the streak right up front. Making use of both a priori and a posteriori probabilities, he demonstrates the odds that one could replicate his success. Needless to say, "there was probably some skill involved". That said, he doesn't allow himself to be satisfied with having done something that most probably could not, and in doing so, demonstrates the kind of character that is difficult to find in an industry where "just getting by" still compensates you pretty darn well.
On valuation:
eta: actually putting a link to the letter in the post would probably help. it can be found here [warning: .pdf]
In the letter, Miller acknowledges the streak right up front. Making use of both a priori and a posteriori probabilities, he demonstrates the odds that one could replicate his success. Needless to say, "there was probably some skill involved". That said, he doesn't allow himself to be satisfied with having done something that most probably could not, and in doing so, demonstrates the kind of character that is difficult to find in an industry where "just getting by" still compensates you pretty darn well.
Active managers are paid to add value over what can be earned at a low cost from passive investing ... We are paid to a do a job and we didn't do it this year, which is what the end of the streak means, and I am not at all happy or relieved about that.The remainder of the commentary is spent on reviewing Miller's investment principles and singling out a few of the reasons why the streak lasted as long as it did. Two sources of outperformance for those 15 years that he finds applicable to investing in general: valuation and portfolio construction.
On valuation:
Valuation is inherently uncertain, since it involves the future. As I often remind our analysts, 100% of the information you have about a company represents the past, and 100% of the value depends on the futureAnd on portfolio construction:
We construct our portfolios the way theory says one should, which is different from the way many, if not most construct their portfolios ... We want our clients and shareholders to own a portfolio actively chosen based on long-term value, not based on index concentration.He touches on other topics that helped the outperformance, such as factor diversification and concentration, and on being willing to take advantage of errors made by others, due to social psychological cognitive errors (read: behavioural finance).
It is trying to invest long-term in a short-term world, and being contrarian when conformity is more comfortable, and being willing to court controversy and be wrong, that has helped us outperform.Miller's letters are always a treat, but this one serves both as a nice summary of his thoughts on investing to date, as well as an example of the type of humility that true investors always possess, even if their results do have odds of 1 in 2.3 million.
eta: actually putting a link to the letter in the post would probably help. it can be found here [warning: .pdf]
Comments:
<< Home
Here is an abridged version of my upcoming book.
http://www.frips.com/4fab.pdf
"The Four Filters Invention of Warren Buffett and Charlie Munger" by Bud Labitan
http://www.frips.com/4fab.pdf
"The Four Filters Invention of Warren Buffett and Charlie Munger" by Bud Labitan
Nice Buffett blog. Care to exchange links? I am the editor of Investorazzi.com, which tracks the investment activities of the world's greatest investors, including the Oracle of Omaha himself.
Stop on by at:
http://www.investorazzi.com
Christopher E. Hill
Editor
editor(AT)investorazzi(DOT)com
Investorazzi.com
"Tracking The World's Greatest Investors"
Stop on by at:
http://www.investorazzi.com
Christopher E. Hill
Editor
editor(AT)investorazzi(DOT)com
Investorazzi.com
"Tracking The World's Greatest Investors"
This is a great blog with very helpful information.
So many complex factors are involved in valuing securities and building solid portfolios.
I am new to the world of investing and I hope to one day be able to say that I have continuously outperformed the S&P 500.
Check out my blog at:
http://360.yahoo.com/profile-nfOy1v8wd68zjFPoubdI_My6x4Ij
So many complex factors are involved in valuing securities and building solid portfolios.
I am new to the world of investing and I hope to one day be able to say that I have continuously outperformed the S&P 500.
Check out my blog at:
http://360.yahoo.com/profile-nfOy1v8wd68zjFPoubdI_My6x4Ij
I am a student of South China Agriculture University.I want a better blog,mine is http://blog.sina.com.cn/missrao,
can you give me some advice,Thank you!
can you give me some advice,Thank you!
good posting...warren buffet has a great ideas for invesmtnts...
http://warrenbuffet-ideas.blogspot.com
http://warrenbuffet-ideas.blogspot.com
Check this out Buffett Fans
http://www.doobba.com/index.php?/Business_News/Lunch_with_Buffett_has_$2.1_million_price_tag.html
http://www.doobba.com/index.php?/Business_News/Lunch_with_Buffett_has_$2.1_million_price_tag.html
I always thought Miller missed some of the basics. He had way to much of Legg Mason in Google. No where near enough diversification.
Great post!
http://warren-buffett-watch.blogspot.com
Great post!
http://warren-buffett-watch.blogspot.com
Dear Mr Warren Buffett:
i would like to ask you to do me a flavor,which is give the letter to the Paramount leader of the People's Republic of China(Mr Hu Jintao)or the Premier of the state council of the people's republic of China(Mr Wen Jiabao)
My father's property had been demolished in 2001 by the Chu Hai (three good)real estate.The demolished of the buildings in chu hai was enforced by the local government.
My father has been negotiating and fight against the China government through lawyers since 2001.Now,he has finally got the law by his side,after the logal government sign the paper,which is his property is legal for certain area (legally approved);therefore,according to the law,he should has the proper compensation.
Although,the real estate and the China government could not denied it:However,the real estate try to leave the whole responsible to the China government.the real estate resist on only give out the second hand houses with bad quality,which is that kind of act is illegal.On the other hand,the Chu Hai government only tell my father to negotiate with the real estate.Until now,the negotiation is still processing in a very slow pattern.
There is a way that we can solve the problem quickly,which is to get help from you or the democratic party (The President of the United States)or Angela Dorothea Merkel ( The Chancellor of Germany)}:Because Angela Dorothea Merkel had been help a lady name Sum Ting,whose case is similar as ours,but more complicated and difficult than our case.
If i can send the letter to Mr Hu Jintao and Mr Wen Jiabao through you,this can be over soon as our case is only notice the top level of Chinna government.Because the letters that were sent to them from us seemed had never reached the hands of the China top leaders.
p.s: P.S i was a year 1 university student of Macquarie in Sydney a year ago:nevetheless,this thing has kept me away from studying in Australia.you may not believe it,but'i think i've got the talent of investing in finacial industry like you and george soros ,i probably got 50%for both of your ability or instinct,not knowledges.but i do know what you mean the future is unpredictable,because you ,george soros,albert einstein is the father of inspiration to me ,and now you are my only hope.
your faithfully
Lo Wing Chi(Hong Kong Citizen)
contact no:home 26798903
email:lochlo_lo@hotmail.com
i would like to ask you to do me a flavor,which is give the letter to the Paramount leader of the People's Republic of China(Mr Hu Jintao)or the Premier of the state council of the people's republic of China(Mr Wen Jiabao)
My father's property had been demolished in 2001 by the Chu Hai (three good)real estate.The demolished of the buildings in chu hai was enforced by the local government.
My father has been negotiating and fight against the China government through lawyers since 2001.Now,he has finally got the law by his side,after the logal government sign the paper,which is his property is legal for certain area (legally approved);therefore,according to the law,he should has the proper compensation.
Although,the real estate and the China government could not denied it:However,the real estate try to leave the whole responsible to the China government.the real estate resist on only give out the second hand houses with bad quality,which is that kind of act is illegal.On the other hand,the Chu Hai government only tell my father to negotiate with the real estate.Until now,the negotiation is still processing in a very slow pattern.
There is a way that we can solve the problem quickly,which is to get help from you or the democratic party (The President of the United States)or Angela Dorothea Merkel ( The Chancellor of Germany)}:Because Angela Dorothea Merkel had been help a lady name Sum Ting,whose case is similar as ours,but more complicated and difficult than our case.
If i can send the letter to Mr Hu Jintao and Mr Wen Jiabao through you,this can be over soon as our case is only notice the top level of Chinna government.Because the letters that were sent to them from us seemed had never reached the hands of the China top leaders.
p.s: P.S i was a year 1 university student of Macquarie in Sydney a year ago:nevetheless,this thing has kept me away from studying in Australia.you may not believe it,but'i think i've got the talent of investing in finacial industry like you and george soros ,i probably got 50%for both of your ability or instinct,not knowledges.but i do know what you mean the future is unpredictable,because you ,george soros,albert einstein is the father of inspiration to me ,and now you are my only hope.
your faithfully
Lo Wing Chi(Hong Kong Citizen)
contact no:home 26798903
email:lochlo_lo@hotmail.com
Here is an idea from ua Corp. Mr. Warren Buffet.
A stock trading system where you set the software to buy and sell...
Forver!
Buy at 1.00 ... sell at 2.00
Ty for hearing me out on this.
A stock trading system where you set the software to buy and sell...
Forver!
Buy at 1.00 ... sell at 2.00
Ty for hearing me out on this.
Our on-line shop of replica watches (www.watchespicture.com) offers the visitors a wide range of exclusive timepieces and watches of top quality. Here you are sure to discover watches featuring numerous designs, styles, innovative functions and complications. Nowadays more and more people refused to choose replica watches as they find it rather advantageous. Maybe, we will give you one more choice and opportunity.
Carrying brands including Rolex , BellRoss,Cartier, Hermes, Omega , Ferrari, IWC etc . We are direct manufacturer, Except the goods and services that our website provide, we also try our best to help you getting a unique product if you want your watch to suit all kinds of color and different dials to show you difference. For each customer and every sale is important to us. We have been providing 100% CUSTOMER SATISFACTION from our beginning. Our past customers have allowed us to grow by recommending our services. Our mission is to continue our 100% satisfaction to made watch being a pop-fashion and affect everyone instead a show of wealth, just because love.
All of our team is watch enthusiasts, we collect up to date information in watches market to keep our products new. We offer the lowest price on each watch in the similar products, we hope that our website will save you money and stay away from fraudulent dealers to take you great value. We offer competitive pricing, but we also knew low prices alone could not make our business superior. We are determined to combine honest and helpful dealings with outstanding service before, during, and after the sale. You can learn our latest service and commitment from our online services before you buy something.
Carrying brands including Rolex , BellRoss,Cartier, Hermes, Omega , Ferrari, IWC etc . We are direct manufacturer, Except the goods and services that our website provide, we also try our best to help you getting a unique product if you want your watch to suit all kinds of color and different dials to show you difference. For each customer and every sale is important to us. We have been providing 100% CUSTOMER SATISFACTION from our beginning. Our past customers have allowed us to grow by recommending our services. Our mission is to continue our 100% satisfaction to made watch being a pop-fashion and affect everyone instead a show of wealth, just because love.
All of our team is watch enthusiasts, we collect up to date information in watches market to keep our products new. We offer the lowest price on each watch in the similar products, we hope that our website will save you money and stay away from fraudulent dealers to take you great value. We offer competitive pricing, but we also knew low prices alone could not make our business superior. We are determined to combine honest and helpful dealings with outstanding service before, during, and after the sale. You can learn our latest service and commitment from our online services before you buy something.
Hi,
It was a very nice article! Just want to say thank you for the information you have shared. Just continue writing this kind of post. Thanks.
Professional Business Plan
It was a very nice article! Just want to say thank you for the information you have shared. Just continue writing this kind of post. Thanks.
Professional Business Plan
Really Nice Blog and Very Good predictions and Free Intraday Stock Tips.
I liked your blog and I would recommend it to my friends who do trading in Free Intraday Trading Tips.
I liked your blog and I would recommend it to my friends who do trading in Free Intraday Trading Tips.
investissement dans l'immobilier Paris, immobilier neuf, conseils gratuits et appartements bien placés. le best of des offres
I really appreciate your post and you explain each and every point very well.Thanks for
sharing this information.And I’ll love to read your next post too.
stock Tips
sharing this information.And I’ll love to read your next post too.
stock Tips
I took a look at your site and recommend it to my visitors. I agree with you on the importance of becoming valuable in many different areas. I believe that it sustains any entrepreneur during challenges that inevitably occur.
Regards,
commodity free trial tips $$ mcx tips free trial
Regards,
commodity free trial tips $$ mcx tips free trial
I give advise on penny stocks under five dollars. I have experience with these type of stocks for those investors looking for an exchange traded fund that invests in lithium stocks their is an exchange traded fund that invest in small company stocks in the lithium business it is Global X Lithium ETF symbol (LIT).
buffet:i lost the hope of saving the world,maybe.human just sometimes not worth i fighting for.so greed and short sight.i thought if i can solve out the energy reservation code or find the very deep truth after the relativity theory,maybe we can make a ufo in the future or control the nuclear safely.i need to express it,maybe i should forget about the truth and just go directly earn money..i feel painful.i hope u can read this.
You made some decent points there. I looked on the internet for the issue and found most individuals will go along with your website.
Regards
free tips
Regards
free tips
BSE SENSEX and NIFTY rallied 300 points and 100 points respectively led by broad based buying. The NIFTY breached the resistance level of the 5200 mark as buying activity picked up across the board ahead of the Reserve Bank Of India’s policy meet tomorrow.
Stock Tips
Stock Tips
BSE SENSEX and NIFTY rallied 300 points and 100 points respectively led by broad based buying. The NIFTY breached the resistance level of the 5200 mark as buying activity picked up across the board ahead of the Reserve Bank Of India’s policy meet tomorrow.
Stock Tips
Commodity Tips
Stock Tips
Commodity Tips
This blog Is very informative,I am really pleased to post my comment on this blog.Very well explain NSE & BSE.
Stock Tips
Stock Tips
This is one of the good articles you can find in the net explaining everything in detail regarding the topic. I thank you for taking your time sharing your thoughts and ideas to a lot of readers out there.
I strongly believe that studying Buffett's life and principles will make us more adept investors. I obsessively studied his life and investment style for many years and read every book I could lay my hands on in the process. This has made me somewhat of an expert on books written about Warren Buffett and I want to share my knowledge with you. If you are interested, kindly visit my recommendations on http://www.bestbuffettbooks.blogspot.co.uk/
Thanks for your great article. Thank you for this article. I spent many years studying Warren Buffett's investment approach and currently keep a blog on books that most interested his investment philosophy.
Please find my recommendations below:
http://bestbuffettbooks.blogspot.com/
Please find my recommendations below:
http://bestbuffettbooks.blogspot.com/
Hi, I came across your site and wasn’t able to get an email address to contact you about a broken link on your site. Please email me back and I would be happy to point them out to you.
Thanks!
Aaron Grey
aarongrey112 at gmail.com
Thanks!
Aaron Grey
aarongrey112 at gmail.com
Thanks for the knowledge. I found this blog is very Knowledgeable to read, i will visit again for more updates... Equity Tips
I am very impressed by the information of this blog and I am glad that I had looked over this blog. Thank you so much for sharing such a great information
MCX TIPS
MCX TIPS
What a great information. Thanks for being this much active on such things. Find us more on Dezire Research
“I jumped on an opportunity to purchase a rental property over the 4th of weekend. Mr Lee was quick to respond and since this was my first time getting a loan to buy a rental property , he was able to help me walk through the loan process. It was a great experience working with a good and kind loan lender Mr Lee. I hopefully know very well if you are outta looking for loan to purchase a property or funding business purpose then Mr Lee will be able to help you with such process here his details WhatsApp +1-989-394-3740. / 247officedept@gmail.com !”
# posted by 
: 10:13 AM
: 10:13 AM
A Really Nice Information For Nse ANd Bse If You Gave Us In Communication. Thanks Sharetipsinfo offers 90% accurate technical analysis based stock market trading tips and share tips for day trading. Share market traders can avail share tips for daily profit.
Thank you for this brief explanation and very nice information. This post gives truly quality information. hope to see you again. I find that this post is really amazing.
SBI share price
Tata Steel Share Price
ITC Share Price
DLF share price
HDFC bank share price
Post a Comment
SBI share price
Tata Steel Share Price
ITC Share Price
DLF share price
HDFC bank share price
# posted by : 5:02 AM
: 5:02 AM<< Home
