By STEPHEN MARRIOTT 22/08/2008
Bill Miller has always been a contrarian investor but however good a contrarian is, the nature of this style of investing will inevitably result in occasions when that investor is out of favour with the market.
Unfortunately Miller’s US Equity fund has now been out of favour with the markets for two years (to 15/8/08) resulting in dramatic underperformance of 25%. The main cause of the problem has been Miller’s strong conviction for banking and financial stocks which have been punished by the ‘sub prime’ crisis, coupled with having little or no exposure in oil and gas stocks which have benefited from a strong oil price.
Although we believe Miller will bounce back in the long run, we feel that the current investment climate will continue to be difficult for his portfolio.
Therefore, following a recent reversal in the fortunes of financial stocks and subsequent sell off in natural resources, which has led the fund to outperform by 9% in the period 11/7/08 - 15/8/08 we feel it is now appropriate to downgrade the fund to two stars (hold status).
Investors looking for a less volatile US fund should consider Martin Currie North American (4 stars) and M&G American (3 stars), an alternative value style fund.