najdorf

Legg Mason: Quintessential Bear Market Value Play

LM will probably bounce back, but only due to the stupidity of retail investors who will leave their money in underperforming funds.

You can't excuse Bill Miller's performance by saying he's a value manager. According to Morningstar, he is in the 100th percentile of Large-Cap Blend (his real category - is AMZN a value pick?) funds over the last 5 years (with 1st percentile being the best). That means he is actually The Worst of his peers. This is a guy with a huge reputation, lots of access to companies, and a very high expense ratio for a large-cap U.S. fund with high assets (of course this is part of why he is underperforming, but the high expense ratio is supposed to be justified by outperformance), yet if you name ANY large-cap fund manager, he is beating Bill Miller (and charging you less in yearly expenses). When someone picks as many losers as Bill Miller has and rides them down as far as he has, smart investors stay away. The only thing keeping LM alive is people's misplaced hope in managerial ability.

Ok, so we've disposed of Bill. Name one of these other LM funds that I should take a look at. Money-market funds that are only staying at $1.00 because LM is supporting them with massive capital infusions out of rapacious expenses on their other funds (How long can they keep that up for? Why wouldn't I just buy a MM fund from Vanguard or Fidelity?) Bond funds that aren't even on the deep sonar of investors who prefer PIMCO, Harbor, Vanguard, Fidelity, T. Rowe Price, etc.? Come on. They'll limp along with the customers that don't read their annual reports, but the smart money will be gravitating to the better-run investment companies. This company's decline is yet another incident that demonstrates the validity of John Bogle's arguments about mutual funds.