Legg Mason Global Asset Management is one of the largest asset management firms in the world. Assets under management as of December 31, 2010 were $672 Billion (11th largest asset manager in the world). 50% of these assets invested in fixed income securities and most of these (70%) are in the Americas Division. Legg Mason Capital Management is one of its subsidiaries. It was founded in 1982, based in Baltimore. It specializes in long-term, valuation based equity management. Bill Miller is chairman and CIO of Legg Mason Capital Management. He graduated from Washington and Lee University with a degree in economics. Before joining Legg Mason in 1981, he served as treasurer of the J.E. Baker Company. Before the subprime crisis, he was one of the most famous and successful investment managers in the world. He was named by Money Magazine as “The Greatest Money Manager of the 1990’s”. Between 1990 and 2005 Miller had a phenomenal track record by beating SPY for 15 straight years. However, between 2005 and 2010 he underperformed the SPY except 2009.
Bill Miller is a long term value investor; he says that:
We are value investors because we are persuaded of the logic of buying shares of businesses when others want to sell them, and we understand that lower prices today mean higher future rates of return, and high prices today mean lower future rates of return.
...One hundred percent of a company's information reflects its past while 100 percent of its value reflects its future.
In a recent interview, Miller said, "I would look for a long- term orientation, and the evidence for that would be a relatively low portfolio turnover. In a world of 110% to 115% turnover, something in the 50% range or less — ideally in the 20% to 30% range — is what would make sense." During the last 5 quarters, he had owned 490 different stocks and half of them are long term investments. 368 of those are still in the portfolio at the end of December 2010. As he suggested, he has a low turnover rate.
He thinks that the US economy is stronger compared to both developed and emerging economies and he is extremely bullish about the US stock market. In mid November, Bill Miller said that US stocks may rise 15% in the next 12 months because of the actions of the Fed. Since then, SPY returned 11.2%.
His 15 largest positions and 15 largest long-term picks are the same. When he invests large amounts in a stock, it is probably a long term investment. Miller had $13.4 Billion invested in US equity. Below are Miller’s 15 largest long term investments at the end of December 2010:
1. The AES Corporation (AES): Legg Mason had $577 Million of AES stock, which returned 2.9% since mid February 2010. Miller reduced his AES holdings by 11%, according to the latest 13F forms filled at the end of December.
2. Texas Instruments Inc. (TXN): Texas Instruments investment returned 46.3% during the past year. The amount of investment is $403 Million. Miller reduced his TXN holdings by 25% during the last quarter of 2010. Since then the stock returned 11.1%. David Tepper also bought TXN during the third quarter.
3. Cisco Systems, Inc. (CSCO): Miller had $363 Million invested in this stock. Stock holdings increased by 5% and it lost 21.9% during the last year. CSCO is Miller's worst performing pick. John Burbank's Passport Capital, Leon Cooperman's Omega Advisors, and David Tepper's Appaloosa are among the hedge funds that lost a lot of money for being bullish about CSCO.
4. Wells Fargo & Company (WFC): Miller had $361 Million WFC shares at the end of December. WFC gained 24.7% during the last 12 months and outperformed the SPY by 3.2 percentage points. Stock holdings increased by 18.5% during the last quarter and WFC returned 9.1% since then. Warren Buffett was extremely bullish about Wells Fargo during the fourth quarter, adding another 6+ Million shares to his $11+ Billion WFC holdings.
5. QUALCOMM Incorporated (QCOM): Miller has returned 50.9% from his QCOM investment of $354 Million during the last 12 months. The stock outperformed the SPY by 29.4 percentage points. Miller reduced his stock holdings by 5% during the last quarter, it returned 18.5% since then. Lee Ainslie, George Soros, and Lee Hobson are QCOM investors too.
6. Microsoft Corporation (MSFT): Miller had $332 Million in MSFT shares at the end of December. These shares lost 4.2% since February 2010. Miller kept his MSFT holdings same in the fourth quarter of 2010. Stock lost 2.8% since then. Microsoft is a hugely popular stock among the top hedge funds. Thomas Steyer’s Farallon Capital, Richard Perry’s Perry Capital, Leon Cooperman’s Omega Advisors, Barry Rosenstein’s Jana Partners, Curtis Schenker’s Scoggin Capital, David Einhorn’s Greenlight Capital, Brevan Howard, and Whitney Tilson’s T2 Partners are among the hedge funds that are extremely bullish about Microsoft. We are a Microsoft investor too.
7. EMC Corporation (EMC): Miller’s $323 Million in EMC has gained 51.1% during the last 4 quarters. Miller has reduced his holdings by 4.5% during the last quarter of 2010. The stock returned 17.5% since then. Andreas Halvorsen's Viking Global likes EMC.
8. American Express Company (AXP): Legg Mason Capital Management held $288 Million AXP shares on December 31st 2010. The stock holdings are almost unchanged since the end of September and it returned 8.1% since then. American Express gained 20.3% during the past 1 year, slightly underperforming the SPY.
9. International Business Machines Corp. (IBM): Legg Mason had $283 Million of IBM shares. This investment returned 30.4% during the past 1 year. Legg Mason reduced the stock holdings by 24% during the fourth quarter of 2010. Stock returned 11.4% since then and outperformed the SPY by 5.6 percentage points. Selling IBM shares was not a good decision.
10. Amazon.com Inc. (AMZN): Miller had about $270 Million of Amazon.com shares at the end of December. The stock returned 60.8% during the past 1 year, beating the SPY by a huge margin. The stock holdings were reduced by 30% during the last 3 months of 2010. AMZN returned 5% since then, 0.8 percentage points less than SPY’s return. AMZN is Miller’s best long-term pick. Facebook billionaire Chase Coleman and Roberto Mignone has large AMZN holdings as well.
11. eBay Inc. (EBAY): Legg Mason had $259 Million of eBay shares. The stock gained 47.1% during the past year and outperformed the SPY, which returned 21.5% since then. Legg Mason reduced their eBay holdings by 26.4% during the 4th quarter of 2010. Stock returned 23.8% since then, outperforming the SPY by 18 percentage points.
12. General Electric Co. (GE): Miller’s $259 Million investment in GE returned 36.4% during the past year. Stock holdings are almost unchanged during the last quarter of 2010. Stock returned 17.3% since then.
13. Citigroup, Inc. (C): Citigroup is one of Miller’s long-term holdings. He had $252 Million worth of C at the end of December. During the past year, C returned 43.6% and outperformed the SPY by a huge margin. Stock holdings were reduced by 16% during the 4th quarter. Stock returned 3.8% since then, slightly underperforming the SPY’s 5.8% return. Citigroup is also a hugely popular stock among several hedge funds (see the list of hedge funds here).
14. Time Warner Inc. (TWX): Miller holds $247 Million of TWX shares. TWX returned 28.3% during the past year. Miller reduced his Time Warner stake by 14% in the 4th quarter. TWX gained 14% since then, outperforming the SPY by 8.3 percentage points.
15. JPMorgan Chase & Co. (JPM): Bill Miller had $245 Million in JPM shares at the end of December. These shares have returned 17.5% since February 2010, underperforming the SPY by 4 percentage points. Stock holdings are almost unchanged during the 4th quarter, stock returned 10.5% since the end of December.
Disclosure: I am long MSFT, C.