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Tickers in this Article: LVLT, S, AES, BAC, AGO, OIH
Bill Miller, the legendary mutual fund manager, managed the best performing stock mutual fund in the second quarter of 2009, as the market turned in its best quarterly performance since 1998.

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The Legg Mason Opportunity Trust returned 48% in the second quarter of 2009. The Trust is considered a mid cap core fund by Lipper Analytical Services, and the fund beat out all other equity funds in any category.

Bill Miller is best known for managing the Legg Mason Value Trust to an enviable and spectacular record of beating the S&P 500, its benchmark, for 15 straight years. This record came to an inglorious end in 2005, and many pundits have made a sport out of bashing Miller, and by extension, value investing.

However, it might be instructive to take a look at some of his largest positions in the Legg Mason Opportunity Trust to see what helped power that performance.

Miller likes telecom service stocks and Level 3 (Nasdaq:LVLT) and Sprint Nextel (NYSE:S) are two of his largest positions at 4.12% and 4.82%, respectively as of May 31, 2009. Sprint Nextel is one of the nation's largest cell phone service providers, while Level 3 owns a fiber network. The two companies are also reportedly engaged in talks to form a joint venture.

No Room For Energy
Notably absent from his portfolio is a significant holding in energy stocks. His top five sectors are:

  1. Financials - 42.20%
  2. Consumer Discretionary - 19.5%
  3. Telecommunication Services - 13.0%
  4. Information Technology - 10.2%
  5. Health Care - 7.0%
Miller has never been a big believer in a new era for energy, but after the Oil Services HOLDRs (NYSE:OIH) fell from a peak price of $220 to $60 a share, one would think that there might have been something attractive to pick up.

The Trust does have a position in the Utility Sector. The fund owns AES Corporation (NYSE:AES), a large utility that owns 43,000 megawatts of generation power. AES sells its power to both wholesale and retail customers.

He is also making a bet on a comeback in financials and has as his largest portfolio position a company called Assured Guaranty (NYSE:AGO), which is 4.96% of the portfolio. Miller also owns Bank of America (NYSE:BAC). Assured Guaranty is a Bermuda-based insurance company that trades at half its book value. The company offers financial and mortgage guarantee services to its customers.

Despite the industry leading performance in the second quarter, the fund had a miserable 2008, with the fund down approximately 65%. Its ten-year average annual return through the end of May 2009 is negative 10.54%.

Time will solve the mystery of whether Miller is in fact back, or just had a great quarter by virtue of his holdings of some of the most beaten up stocks in the market. (For more, read Choose A Fund With A Winning Manager.)

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