...Bill Miller and Value Trust Background Information Bill Miller is one of the most renowned professional fund managers. This can be proven by the outperformance of the Value Trust, which is managed by him, compared to its benchmark index, the Standard & Poor’s 500 Index (S&P 500), for an astonishing 14 years in a row; and this marked the longest streak of success for any manager in the mutual-fund industry. By the middle of 2005, Value Trust is worth $11.2-billion. Bill Miller’s approach to investment management was research-intensive and highly concentrated. For instance, nearly 50 percent of Value Trust’s assets were invested in just 10 large-capitalization companies. While most of Bill Miller’s investments were value stocks, he was not averse to taking large positions in the stocks of growth companies. In other words, Bill Miller’s investing style is iconoclastic: “You simply can’t do what he’s done in the supremely competitive, ultra-efficient world of stock picking by following the pack…The fact is that Miller has spent decades studying freethinking overachievers, and along the way he’s become one himself.” Mutual Funds Definition A mutual fund is an investment vehicle that pooled the funds of individual investors to buy a portfolio of securities, stocks, bonds, and money-market instruments to meet specific investment objectives; investors owned a pro rata share of the overall investment portfolio (Bruner, 2007). The various investments included in a fund’s...
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...Group Case 1: “Bill Miller and Value Trust” 1. How well has Value Trust performed as of the date of the case? By almost any measure, Bill Miller’s Value Trust had been a remarkable success over the past 15 years. Over this time, the Value Trust had an average return of 14.6%, beating the S&P 500 by 3.67%. Miller took the long approach to investing, rarely beating out the whole market of fund managers in any particular year, but consistently outperforming them over the last 15 years. In 2005, Miller’s Value Trust had beat the S&P’s 500 Index for 14 years in a row, while no other manager had ever been able to beat it for more than 7 years. Sadly, Miller’s fund has trailed the S&P 500 in four out of the past five years. 2. What might explain the fund’s performance? Bill Miller’s investment strategy at Capital Management Value Trust has always sought long-term growth of capital. Value Trust’s assets were invested primarily in 10 large-capitalization companies with some additional investments in riskier growth stocks at higher price-to-earnings ratios that paid little to no dividends. The fund’s strategy was to focus on equity securities that offered potential for capital long-term growth. The reason for the fund’s poor performance since 2004 is likely attributable to its significant investment in equity securities. Likely, some of this investment included mortgage-backed securities, i.e. investment in the subprime mortgage market; thus significant fund holdings...
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...expense ratio, which is deducted from the fund's average net assets, is accrued on a daily basis. Turnover – The percentage of a mutual fund or other investment vehicle's holdings that have been "turned over" or replaced with other holdings in a given year. The type of mutual fund, its investment objective and/or the portfolio manager's investing style will play an important role in determining its turnover ratio. All things being equal, investors should favor low turnover funds. High turnover equates to higher brokerage transaction fees, which reduce fund returns. Also, the more portfolio turnover in a fund, the more likely it will generate short-term capital gains, which are taxable at an investor's ordinary income rate. Fundamental Analysis – A method of valuing securities such as stocks and bonds that attempts to discover their true value (intrinsic value) by examining related economic and financial factors. Debt Load - The amount of debt or leverage that a...
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...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, investors...
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...bru6171X_case02_023-038.qxd 11/24/12 2:24 PM Page 23 CASE 2 Bill Miller and Value Trust Bill Miller’s success is so far off the charts that you have to ask whether it is superhuman. Quite simply, fund managers are not supposed to be this good. Is it mortal genius, or is it celestial luck?1 By the middle of 2005, Value Trust, an $11.2-billion mutual fund2 managed by William H. (Bill) Miller III, had outperformed its benchmark index, the Standard & Poor’s 500 Index (S&P 500), for an astonishing 14 years in a row. This record marked the longest streak of success for any manager in the mutual-fund industry; the next longest period of sustained performance was only half as long. For many fund managers, simply beating the S&P 500 in any single year would have been an accomplishment, yet Miller had achieved consistently better results during both the bull markets of the late 1990s and the bear markets of the early 2000s. Over the previous 15 years, investors in Value Trust, one of a family of funds managed by the Baltimore, Maryland–based Legg Mason, Inc., could look back on the fund’s remarkable returns: an average annual total return of 14.6%, which surpassed the S&P 500 by 3.67% per year. An investment of $10,000 in Value Trust at its inception, in April 1982, would have grown to more than $330,000 by March 2005. Unlike the fund’s benchmark, which was a capitalization-weighted index composed of 500 widely held common stocks, Value Trust only had...
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...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....
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...Case 1: Warren Buffet a) Buffett portrays intrinsic value as “The only logical way to evaluate the relative attractiveness of investments and businesses.” (Bruner et al, 2009 p.7) It has accorded such importance because it can be used to estimate the value of the businesses ongoing operations and not the companies stock. Through the calculation of the discounted cash flows, and moreover the net present value of the forecasted performance, we can therefore figure out whether the investment holds the potential to generate value. By comparing these amounts to ones within the market and therefore being able to identify certain businesses that are very undervalued. The alternatives of valuing an investment include calculating the book value or accounting profit. Buffett rejects the alternatives to intrinsic value because he believes that the conventional accounting approach or methods follow certain rules that do not accurately forecast the future of the investments performance. (b) The very essence of Buffett’s investment philosophy is that of his use of intrinsic value to determine the quality and future value of an investment, instead of basing it on accounting reality. However, accounting profit should be used hand in hand with intrinsic value because it helps clarify managements skills and how they put their capital to use. Buffett calculates the discounted cash flows of the particular company, therefore understanding its economic reality. Rather than the financial statements...
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...QUT | Case Study 4: Market Efficiency | Bill Miller and Value Trust | | Name: Huey Ngu Student ID: 08324093Tutor Name: David FairDate: 1 November 2013 | Words: 1097 | Contents Introduction 2 Past and current performance of Value Trust 2 Investment strategy of Bill Miller 3 Efficient Market Hypothesis 3 Bill Miller’s letter to shareholders 4 Changes in Chief Investment Officer (CIO) 4 Recommendation and Conclusion 4 Reference 6 Appendices 8 Appendix A: Data of LMVTX, S&P 500, and 30 years bond 8 Appendix B: Alpha and Beta between 1991 and 2013 9 Appendix C: Alpha and Beta between 1991 and 2005 9 Appendix D: Alpha and Beta between 2006 and 2013 9 Introduction Bill Miller is known as famous fund manager that hold the record of beating benchmark index for 15 years in a row. However, his poor performance after 2005 was the reason that the investors run away from his fund. Hence, arguments of whether Bill Miller’s previous performances involve luck or skills appear. Furthermore, this report will also discuss whether investors should invest in Bill Miller’s Value Trust. Past and current performance of Value Trust Figure [ 1 ]: LMVTX VS S&P500 (Morningstar Principia , 2013) Bill Miller had made an achievement of longest streak performance of beating the market. Refer to figure 1, it had showed that Bill Miller’s Value Trust had consistently beat the benchmark index of Standard & Poor’s 500 (S&P 500) between 1991 and...
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...Miller My two favorite short stories are “The Lottery and “Young Goodman Brown”. Making a decision which is better will be a tough choice. Although both stories are similar in its theme, it is transported differently in each story. The stories display different character analysis and word choice. I. My favorite pastime is reading short stories. a. Two stories I can read repeatedly. i. “The Lottery” by Shirley Jackson. ii. “Young Goodman Brown” by Nathaniel Hawthorne. b. The authors battle with depression in their lives. i. Shirley Jackson was stricken server depression from time to time. ii. Nathaniel Hawthorne was depressed because of his ill health and the toll of the Civil War. II. Scenery and characters of “The Lottery” and Young Goodman Brown. a. Towns identified as small villages. i. “The Lottery” was a small village with no name. 1. The story gives a population of 300 people living there ii. “Young Goodman Brown” story took place in a small village called Salem. b. The wives in the story played contrast characters. i. Tessie Hutchinson was a main character that went through climax and denouement. ii. Faith Brown played somewhat of a static character. c. The husbands were portrayed differently in the stories. i. Bill Hutchinson persona was very multi-dimensional ii. Goodman Brown played the main character that was a foil to Ms. Hutchinson. III. How are we to use the themes of these stories? a. Analyzing...
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...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 unless...
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...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 of...
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...Introduction to the case- Greg Miller (President and CEO) and Bill Tanner, (CFO) founded SaleSoft in June 1993 with the objective of marketing PROCEED, a Comprehensive Sales Automation System (CSAS). In the past 18 months PROCEED had received very favorable responses from prospects. However, converting interest to actual sales was taking a long time with only five PROCEED systems having been sold to-date. In September 1995, Gregory Miller was faced with the question of whether or not to introduce a Trojan horse product. Trojan Horse (TH) could potentially distract SaleSoft from its primary objective of becoming a leader in the high end of the Sales Automation (SA) software industry. In addition, there was a risk that it would cannibalize sales from the PROCEED product that SaleSoft was currently marketing. Finally, TH could potentially prevent SaleSoft from forming relationships with consultants whose support was critical to the success of PROCEED. Yet, TH might offer an easy way for SaleSoft to get into new customer accounts, gain quick sales, and generate much needed revenues. With limited funds and the need to show performance before seeking additional venture capital, Miller and Bill Tanner, executive vice president and CFO, had to decide whether to continue trying to sell PROCEED to select customers, or to make an all out effort to launch TH to a much larger customer base. PROCEED VERSUS TROJAN HORSE Points in favor of PROCEED- 1. Well into development phase...
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...Running Head: MASTER OF EMOTIONS (EI), BILL CLINTON MASTER OF EMOTIONS (EI) BILL CLINTON Jim Whaler Florida State University Management 605, Section 1 Dr. Jane Bagley November 3, 2011 Abstract Bill Clinton was a President that did not allow anyone to tell him something could not be done. If this President found that something could not be completed, he would go as far as possible and then start on the next agenda on the list. He was a well organized President with people in his cabinet that admired this ability. President Bill Clinton changed the entire ambiance of the country with his command of emotional intelligence. When the country was torn on issues, he would find a way to bring people together and solve the problem, or at least reach a successful consensus. Personal problems riddled the Clinton presidency, but this did not stop the forward successes claimed by this giant of a man. Unemployment was a sore subject, but under President Clinton’s direction the economy grew and women and minorities finally began to be placed in high positions in the federal government. The private sector grew and added a high number of jobs in the economy. Bill Clinton is—just--what the U.S. needed during his presidency. Master of Emotions (EI) Bill Clinton During the years of President Clinton’s administration, emotional intelligence was clearly demonstrated in his daily operations. Leaders throughout the world took notice of the incumbent well educated, well spoken...
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...Question 1: What is the ‘problem’ represented to be in your case study? An initial analysis of alcohol and drug-related violence inquiry in Sydney (CBD) makes it clear that the ‘problem’ has been represented to be alcohol consumption and substance abuse, causing violence and anti-social behaviour in King Cross and around the CBD areas, which, in turn, has triggered public safety. Clearly, the ‘problem’ has been directed to individuals, licensed premises and trading hours. Bacchi (2009) argues that, rather fixing and addressing policy problems, how policy makers construct or represent ‘problems’ in a particular way, will give shape the problem, which in turn, will be the representation of the policy problem. Bacchi (2009) suggests that the representation of the problem will determine the policy response of a particular issue or problem. Following the death Daniel Christie as a result of being assaulted in King Cross, on the 21th January 2014, the New South Wales (NSW) State Government introduced new restrictions on licensed premises to reduce alcohol-related violence (Roth, 2014). Therefore, the new regulations (the January 2014 reforms) specifically focusses on licensed premises through restrictions( contained in the Liquor Amendment Act, 2014) on the trading hours such as, 1:30 am lockouts, 3a.m last alcohol, a freeze on new liquor licences, no alcohol takeaway after 10 pm, banning of people up to 48 hours, extension of temporary and long-term banning orders issued to “trouble-makers”...
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...Literary Analysis of Death of a Salesman By definition, an entrepreneur is a person who organizes and manages any enterprise usually with considerable initiative and risk. Although different entrepreneurs have different accomplishments, they all have some personality traits in common. In The Death of a Salesman by Arthur Miller, Biff and Happy do not have the integrity, willingness to learn, and commitment to a venture required for entrepreneurs. Alexander Becker, a distinguished business journalist, wrote in his article that “Your business depends on your integrity while your integrity depends on delivering what you promise.” It is important that Integrity is embedded within the entrepreneur and his business that customers can easily distinguish it and are easily drawn to it. However, this essential trait of an entrepreneur is not seen in either of the Loman brother. Happy has great capacity for self-delusion; being only an assistant to the assistant buyer, he constantly brags to his family that he is the assistant buyer at his store. When Biff tries to free him from this self-delusion by saying that “you’re one of the two assistants to the assistant, aren’t you?”(Miller 131), the statement “Well, I’m practically…” (Miller 131) indicates that he is still attempt to cover up the exposed truth. In another occasion, he tries to lie to Linda that Wille had a great dinner with them by saying that “Boy, what a night you gave me!”(Miller 124) Even though he is aware that Linda...
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