3 investing strategies that pushed Bill Miller to billionaire status
Bill Miller, an American investor, fund manager, and philanthropist, remains relatively overlooked in the realm of investing, despite his remarkable achievement of outperforming the S&P 500 index for an unprecedented 15 consecutive years while at the helm of Legg Mason Capital Management Value Trust. Naturally, this significantly surpassed any benchmark by orders of magnitude. However, his choice to invest in Bitcoin led to a decline of over 70 per cent in his fund over 18 months.
While Miller endorses the concept of value investing, which entails concentrating on undervalued stocks with robust fundamentals, he refrains from labelling himself as a value investor. This deviation from the label may be linked to his achievements in the stock market. However, a closer examination of the principles guiding successful fund managers reveals that his emphasis lies more on concepts such as margin of safety and intrinsic business value.
The trio of principles that underpins Bill Miller’s success as an investor includes:
Rather than depending solely on conventional metrics such as earnings per share (EPS), Miller underscores the significance of free cash flow (FCF) as a superior indicator of a company’s genuine profitability and sustainability. FCF denotes the actual cash a company generates after factoring in operating expenses and capital expenditures. Miller’s emphasis on FCF is driven by the goal of identifying companies capable of generating consistent cash flow, enabling them to reinvest in the business for sustained growth and, ultimately, creating value for shareholders.
Bill Miller’s method of computing expected return through the use of free cash flow yield and growth is undeniably intuitive and perceptive. Miller
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