Miller Credits Winning Streak to Pursuit of Long-Term Growth

Baltimore has a new iron man to challenge the former Oriole infielder's record streak of 2,632 consecutive game appearances. Bill Miller, portfolio manager on the Baltimore-based Legg Mason Value Trust fund, leveraged a late-December surge to beat the Standard & Poor's 500-stock index for the 14th consecutive year. The next-longest streak in the industry is half as long.

Not surprisingly, Miller's philosophy for the $11.9 billion Legg Mason Inc. fund is rather Ripkenesque.

"The biggest opportunity for investors is really thinking out longer term," Miller told The Wall Street Journal. "Our turnover rate has dropped significantly as we've tried to lengthen our time horizon. I think that has contributed to the consistency of our results.

"As for the so-called streak, that's an accident of the calendar. If the year ended on different months, it wouldn't be there, and at some point those mathematics will hit us. We've been lucky. Well, maybe it's not 100% luck. Maybe 95% luck."

Miller said his approach is to look beyond traditional metrics in evaluating a business' potential. In fact, rather than focusing on a particular style, i.e. value or growth, or market capitalization, Miller is known for seeking favorable prices given a stock's growth potential.

For instance, while some asset managers are skeptical of online retailer Amazon.com, Miller likes its ability to generate huge cash flows and its success in entering new product categories and geographies. He also likes its Dell-like business model -- both are "direct-to-customer purveyors of goods," he noted -- and thinks Amazon will have near-term sales growth of 25% or higher. In the long-term, Miller sees a 15% surge in revenue for the company.

"If you assume the company traces roughly the same growth as Dell and you look at its current valuation, it should outperform the market by a factor of at least two," he estimated.

As for the market outlook in 2005, Miller expects higher returns as the market emerges from the uncertainty of the last nine months and projects returns in the 7% to 8% range.

"This year I think the economy will be fine, cash flows will be great, dividends will be good and mergers and acquisitions will be extremely strong. So, investor, business and consumer confidence will remain robust. That should lead to a good market."

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