YouSaid · the spoken record

Bill Miller

lines on the record: 99
first: 2016-11-04
most recent: 2016-11-04
sittings or episodes: 1
sources: podcast

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“Directly on investing, there's a really interesting connection that's probably only because of the military intelligence training. And that is with the SEC, nobody wants you to have inside information other people don't have. But you can have what they call a mosaic approach where you put pieces of information together and figure something out. And we had extensive training in military intelligence in that exact thing, which is taking disparate bits of information and using them to create, in essence, a picture, probabilistic picture of what might be going on and what could happen and looking at various scenarios. All of that is directly applicable to, of course, to looking at companies and looking at the information and trying to get a picture of what's going to happen with those businesses and the economy.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, initially I worked for the CEO directly for a couple of years. And did a variety of different oversaw a variety of different things. And then I was also named the Assistant Treasurer. And the treasurer was the one, got much older than me. But he was the one running the portfolio. I was helping him with that, you know, doing research and doing stuff like that. And then he left for another job. And the job was vacant. And so, again, I was very young. And they're like, well, you can be the interim treasurer and we'll go find a treasurer. And after about six months, they didn't find one, so they just let me do the job.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I bought RC with the money that I had made by having a paper route and umpiring baseball games and doing stuff like that. And RCA stock doubled and I used that money then to buy a car, first car, when I was like 17 years old. It's a triumph TR4.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“And he said, Yes, sort of. And I said, well, that's what I want to know about because I don't like to do work, but I do want to make money. And so, and that's how I got interested in stocks at that point in time. And there was a book, which is probably still out there that Merrill Lynch was giving away called How to Buy Stocks by Lewis Engel. And in order to familiarize people with the stock market, it told the story of some little kid that started a fishing pole company. And it was kind of a parable about stock buying. And since then, I've always been just interested in stocks.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“And he said, Well, they're parts of a business. I said, why are you looking at this? And he said, well, he said, you know, you can make money if you know how to pick stocks. And I said, what do you mean? Show me what this means. So he takes something, I'll just make up the thing, say General Motors. He says, there's GM. That's the car company that makes Chevy and Buick. And I'm like, okay. And I said, what are those other things? Well, that's the price. There's the opening price of the stock and the closing price. And I said, what's the thing at the end? And it's like plus one quarter. He said, well, that's the change. And I said, what do you mean? I said, well, that's a quarter. That's 25 cents. And he said, so if you own the stock the day before, you made 25 cents. And I said, well, what do you have to do to make money? And he said, what do you mean? I said, what do you have to do? How do you make it make money for you? He said, well, you don't have to do anything. It just does it by itself. And I said, wait a minute. There's a thing where you can make money without doing any work.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“But I've been interested in stocks since I was very young. In fact, it's an amusing story that people have written about. So people say, how did you get interested in stocks? When did that happen? And it happened when I was nine years old. And I was living in Miami at the time, and I came in from mowing the grass. And my dad was reading the newspaper, and he had turned to the stock pages, which of course don't look like the sports section or the comic section, right? Just numbers and letters. And I said, what's that? And he said, well, these are stocks. I said, what are stocks?”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I had an undergraduate degree in economics and European intellectual history from Washington and Lee in Virginia. And then I went to grad school at Hopkins in the PhD program in philosophy. And between that, I was in the military intelligence overseas.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Part of the pension was managed outside And so we had a pension committee that evaluated managers, and then part of it was managed internally.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“I came in to succeed my now late partner, Ernie Keeney, as director of research. So when I was a treasurer, I was doing normal treasury functions, bank relations and all, but the baker company had a fairly significant stock portfolio that they managed internally, which I did as well. And it was that that I think caught the attention of the people at Lake Mason and some of the people that she knew there.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“I was a very young treasurer at a privately held company called J.E. Baker, which sold refractories to the steel and cement industry. And I got to Lake Mason because my wife was a broker at Leg Mason. So we got married overseas when I was in the Army. And then I went back to, I went to Baltimore, I went back to Baltimore to go to grad school at Johns Hopkins. And so when I was in grad school, she got a job at Leg Mason. That's how I got to know the people there.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“In the early days, we did all caps. So we had almost no money under manually. You started with zero under management, so we could do anything. This is 1982 when I think the first portfolio that we put together in this summer of 1982 had a 7.5% dividend yield and traded at four times earnings and a discount to tangible book. At the peak, we're mainly large cap. But again, because we're contrary in value investors, we're liquidity providers when people wanted out of something. So the size of it didn't matter too much. It didn't affect us too much. My friend Will Danoff, another guy's beat the market over his entire career, runs the Fidelity Contra Fund. It's the biggestly managed fund. And he's got a great record with $100 billion in assets.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that 2008, the financial crisis and the housing collapse kind of changed the psychological polarity of people with respect to savings and investment and made them, I'd say, both risk and volatility phobic. And so they're terrified of risk, and especially if they saw their house drop 35% from peak to trough. And that we had an unemployment rate that hit 10% at one point. And then there's just the general anxiety and angst that you see whenever macro pops up. I mean, the stock market had the worst start to a year in history this year, just because people got worried about oil, about Russia, about China. So these fears flare up. And I think they're due to the financial crisis. And it's just going to take time.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“If you have low inflation and low growth, if you look at it right now, so it's astonishing to me that you have this year again people pulling money out of equity funds at the fastest rate since 2008 when the world was falling apart. And you have that one if you were just to sit back and abstractly say, what's the best environment to own stocks? You'd say, oh, well, you want to have economic growth, but it can't be too fast to stoke inflation or to cause the Fed to get hostile. We have to have low inflation, so PE ratios can be high. We want a good beginning dividend yield and a good dividend growth rate. We want GDP to be at an all-time high. We want household net worth to be at an all-time high. We want profit margins to be at an all-time high. Oh, that's true. And yet valuations right now are nowhere near the historic highs.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“The greater risk is that they tighten too soon into a fragile economy. And again, I don't see how they do four unless the rest of the world is also starting to grow as well because the dollar would come. So let's say.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“I would be very surprised if they did four and four. I think you're looking at, I think you're probably looking at two and two as opposed to four and four. If they did four and four, it would only be because the economy was growing rapidly, much more rapidly than they think it is. In which case, earnings would be higher. So I think that the great option.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, again, because the market leads the economy. So the stocks went up before the earnings came through. But right now in the overall marketplace, if this is the right level for 10-year treasuries, 175 or so. And two and a half is the right level for 30 year treasuries, then the right level for stocks is not 17.5. It's probably 30 or 35 times. Really? So I think that the market right now is already discounting a rise in the 10-year, probably to 3% or 4% over the next several years. So putting it differently, I think you can have the 10-year get cut in half in the sense of double the yield on it without that harming stocks.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Again, different people have different views on this. My view is emphatically no. We are not seeing that. We had obviously very cheap stocks in the spring of 2000. The S&P was 300.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“There's all kinds of different ways to kind of measure bull market episodes cyclically, secularly. I tend to think of a secular bull market as one that starts at very low valuation and starts at pessimism, so starts at the end of one bear market, a bottom, and then the peak being when you've reached a point where if you look out 10 more years, you don't earn any rate of return, you earn a very low rate of return. So I think that's from that standpoint, the previous secular bull market was 1982, summer of 1982, to the end of 1999 or the spring of 2000, where you had roughly 17% a year from the bottom to the top. I tend to think about it, to understand that a secular bull market like that encompassed the crash of 1987, encompassed recessions, encompassed declines in the market, just because the market goes down or you have a recession doesn't mean that the bull market is over. I mean, the economic cycle might be changing, but the bull market is over when...”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think charts are a way for me of visualizing fundamentals, looking at the supply and demand expressed graphically. I don't think that there's any special magic to charts. The academics have studied this in a variety of ways and haven't found sustainable reproducible way algorithmically to use charts. But nonetheless, what they can help you visualize what's going on and what has happened. And again, it's a supply-demand thing mainly.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Essentially. And yeah, I think also we're in a secular bull market in stocks. Began in March of 2009, and I think that lasts until like all secular bull market stocks get too expensive. But they're not too expensive today. They're not anywhere near as expensive as they were in 1999. We're in 1968 or in 1987 in the summer for that matter.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think that we had a 35 year bull market in Bonn from 1981 till this summer. I think we hit a double bottom in bonds in 2012 at around 138 and then around 135, I think this summer and rebounded sharply from both of those levels very quickly. And if you look at the way bonds have traded, the way the safe parts of the market have traded, so utilities, telecom, consumer staples since the summer, they've all begun to wobble. And so all of that tells me that this 35-year bull market is probably over. We had a 35-year bear market from 1946 to 1981, followed by a 35-year bull market.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“And the median PE ratio in the SP 500 is about 17.5, which is above the long-term historic median. But miles below where it theoretically ought to be if this is the right level of bond yields. And so I think one of the things, and we have a partnership that we're just getting underway. And in that thing, I'm a long portfolio of stocks against a short position in the long treasury.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, stocks are stupidly cheap relative to bonds. That's my view. I believe that taking bonds first. We hit a level over the summer where bond yields globally had never been this low in the 5,000 years of history that we have about bond yields. So they're the most expensive they've ever been in history because of the aftermath of the financial crisis and slow growth and all of the stuff that we read about every day. And even if you go back a year ago, right? So a year ago, the 10 year Treasury yielded over 2% to like 2.15%. And now it's 175. So again, this year, bonds have beaten stocks. And so what you have now is a situation where stocks yield more than bonds.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“What is that focus? Yeah, that's a really interesting product. Actually, we started it internally in, what was it, 2009. We wanted to do it as a joint.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“I do that fund with Samantha McLamore, who has been with us 15 years. She started out as an analyst and moved up to being an assistant manager, and now she's co-manager of the Opportunity Fund. And then we have an income fund called the Miller Income. And it will, it's run by my son and I. I was going to say some guy named”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Billion three in that domestic version of it, and probably the most unusual thing about it, which will never happen again. If you open the New York Times special section on mutual funds of two weeks ago, you'll see that the Opportunity Trust was the single best performing fund of all domestic funds in the third quarter. And then the single best performing fund of all domestic funds for the last five years. And that will probably never happen again.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I would say so-so 2000 had a very bad 2007 and 2008. It was one of the best performing funds in 2009. It was the single best performing fund of all funds in 2013, 2012. And then the best performing fund of all funds above 50 million in 2013.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, run as a joint venture for most of that period. And then in 2000, I guess 14, we moved out of the Leg Mason building into our own space. And then just this year, just last, I guess, yeah, just this year, we reached a deal, like Mason and I, where I would buy them out and buy now two funds that are advised by LMM by that advisory firm out.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Or so Leg Mason decided to combine my subsidiary, Leg Mason Capital Management, with Clearbridge, which is a New York-based equity shop. I did not think that was a particularly good idea. And so what I was able to do because I had operational control of LMM, was to extract that from that transaction and set it up as a separate entity and a separate business. But I had to go then go restaff it from the standpoint of trading and reporting and production and compliance and all that kind of stuff.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“LMM was created in 1999 when we started, in 1990 we started the Leg Mason Opportunity Trust, and it was created as a joint venture between myself and Leg Mason. It was the only Leg Mason subsidiary that wasn't 100% owned by Leg Mason at the time. And the idea was that Leg Mason and I would be partners in that particular fund, whether it did well or not. And so that was run coextensively. Le LMM was run co-extensively with Legmason Capital Management, which I was the chairman of. And then in 2000, I want to say 2012.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“And the Dow was down. And again, that bifurcation was so large and the valuation discrepancy was so large. And I'd say that the final. Of that whole thing was at the end of the first quarter in 2000, something like 65% or 70% of active managers beat the market in that quarter. Which is an extraordinarily high percentage At the same time there were only two sectors of the ten or eleven SP sectors that beat the market, utilities. So, what that told me, and nobody was owning utilities, right? So, what that told me was everybody was crowded into tech. Everybody's overweight tech. There's nothing more to go in that. And again, that coupled with valuation said it's time to go the other way.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“The real trigger for me in that environment that really kind of put paid to the whole thing was there's a two, it was twofold. Number one was there was a headline in the New York Times in March of 2000 about Julian Robertson. It's called the end of the game or the end of an era. And it talked about how value investing was dead and about Julian Robertson had to close up shop. And at Buffett, of course, had done poorly for several. Unperformed, right? Yeah. Done poorly. And then so that was kind of one trigger that everybody had thought that that was dead. And the second one, maybe more important one, was that from the spring of 1999 to the spring of 2000, the first quarter of the first quarter of 2000, the Nasdaq was up 100%.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“We went from 38% of the portfolio, I think, in the beginning of 2000 in tech to no percent by the end of the first quarter. And the reason for that was that the market had been going up 25% a year. And corporate earnings have been growing very rapidly. And valuations got way out of whack. So back at that time, as you may recall, you had Microsoft was 60 or 70 times. Cisco was that. GE was 50 times. Home Depot was 60 times. So the valuations were just way, way, way out of whack for mega, mega cap, and for technology. And part of our thought as we looked at companies like Dell and AOL, it wasn't so much that the total market value of those businesses was way out of whack with the potential. There would be some interruption there. And when that interruption came, the companies would get killed. And then the Fed was tightening at that time. And I think that the...”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“There is no line in the sand. We actually, part of the reason that that streak went on, and part of the reason I was manager of the decade, was that with AOL and with Dell, for example, both were 50 baggers for us. But they got to be as much as 20, 25% of the portfolio, which had never happened before. Fannie Mae was 14, I think, at the peak. And then we fortunately were able to cut them.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“At all, but it certainly had the potential to do so. And so that's really trying to understand what the company's possibilities are, what the total addressable market for the business is. And the other part of it is that when you get it, when it becomes a big winner like that and it becomes a bigger and bigger part of the portfolio, part of what happens is that just from a portfolio management technique, it becomes riskier in the sense of it has a greater and greater impact on the portfolio. And that becomes a question of how you size the position.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's interesting. Part of the thing is you have to try and understand the potential of the company. General Motor is not going to be a 50 bagger, right? General Motor is a mature company. AOL was a very new company, a small company in a very big new area. So it had a lot of potential. We didn't know it was going to go up”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“The economy people got nervous exactly. So what happened then was that you could buy companies like Dell, which is a relatively new company at the time, at five times earnings. Wow. You could buy Nokia at six times earnings because people were worried. And they also mistaken, they didn't properly analyze those businesses. Dell's growing 35% a year trading five times earnings. So we bought Dell then, we bought Nokia, we bought America Online, another one that went up 50 times after we bought it. So what we did was unusual for value investors is we got into technology at that time and most value investors following Warren Buffett's kind of dictum that he didn't own technology he didn't understand it we through some work that we'd done with the Santa Fe Institute came to understand the economics of technology were different from what people traditionally believed and it was much more predictable than people believed”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, yeah. And he noted that every streak is some combination of skill and luck Depending on the length of it and how it's achieved and stuff like that, I'd say the thing that contributed to it probably the most was a pivot that we made in 1995. So five or six years into it, when technology stocks got very cheap because people were worried about a recession. And you may or may not remember the Jeff Vinnick ran the Magellan Fund at that time and it raised a lot of cash because the Fed had been tightening.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, Stephen Jay Gould wrote a piece on streaks, the late paleontologist, and he noted that he went through all the different sports streaks and stuff like that. I was going to say paleontologist.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“It will be, yeah, it's currently 50% owned by Leg Mason and 50 by me, but I have a deal to buy them out, which should close in the spring of 2017.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“That's amazing. And then, of course, what happens is that the assets always peak with the peaking of performance because if the performance kept up, the assets would keep going up.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“It really didn't. And what's interesting about that is that while the fund got to 2020 or $25 billion, I think at the peak, we had another 50 billion of institutional assets to go along with it. So the overall money under management in that one strategy at the peak was around $75 billion. And what we observed anyway ironically is that as the assets got larger, the performance got better”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“And so the faster the growth rate of gross profit dollars, namely what they have to invest, the higher the valuation that the company has been able to attain.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“It comes down to, again, the issue of accounting based metrics versus economic metrics. So with Amazon, their natural business is one that has a marginal return on capital of triple digits. And when people say Amazon doesn't make any money or doesn't make much money, what they're really looking, I think, at the wrong sort of metrics, because everything below the gross profit line at Amazon they consider an investment. So some of those investments are capitalized, some of those investments are expensed. But Amazon, if you begin to, if you do a little bit of math on it, a little bit of statistics, what you'll see is that Amazon's share price historically, it isn't correlated with profit growth. It isn't correlated with cash flow growth. It's correlated with the growth of gross profit dollars.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Amazon's our largest position. That's a completely different exercise because Amazon is a completely dominant company with an enormous total addressable market and incredible competitive advantages. So it's going to have a growth, it has growth rate of right now roughly 30% a year, which is unheard of, and it kept me of $100 billion of revenues”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there are many, many ways to attack that issue. One of the things that we try and do, if the economy is in recession, for example, or the economy is in a boom, we will tend to normalize that. So if the economy is growing more rapidly than normal, when we're looking at a company, we will bring it back to a normal growth rate. If the company, we're also looking at the company economics, and those are typically a function of the industry economics. So you start out with industry economics, you look at company economics, quality of the assets, quality of the management. But all of those kinds of things go into trying to figure out what the company is going to do. And you know that a company like General Motors, for example, is going to be a company that's a very mature, slow-growth company operating in an industry that has global overcapacity and that's under a lot of technological threat. So that all goes into thinking about a company like that.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, absolutely. It's not so much growth at a reasonable price so much as it is that growth is input to the calculation of value. And so companies that grow faster, other things equal, assuming they're earning above the cost of capital, are more valuable than companies that grow more slow. The cash flows will compound more quickly”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“The classic Graham and Dodd approach was an approach that focused mainly on accounting metrics. And so PE priced a book, priced to cash flow, those kinds of things. And toward the end of his life, Ben Graham made a point that those things no longer work because they became replicable and they then identify companies that were mispriced. They tended to identify companies if the valuation statistics were superficially attractive. Those were typically companies that had lower returns on capital. And then unless those returns on capital changed, those low accounting metrics didn't give you outperformance.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, what I'm trying to do, what we're trying to do, the team's trying to do is find companies that trade at large discounts to what we call intrinsic business value. Intrinsic business value is the present value of the future free cash flows of the business. And then we're also looking for companies where you're starting out with low expectations, where people don't believe that the future looks very bright or that there's a lot of controversy. And then with that, the key, we use every valuation technique known to man, but the key one that we're always starting with is free cash flow yield. So just under a checkbook accounting approach, like you have your own checkbook, we want companies that ideally will start out with a 10% free cash flow yield. And there's nothing magic about that. That's just a heuristic that we've developed over the years. It tends to work. But hire is always better as long as those free cash flows are sustainable.”
2016-11-04 · Masters in Business · Barry Ritholtz's Masters in Business: Bill Miller Interview · IDENTIFIED FROM THE TRANSCRIPT · source