Legg Mason Value guru Bill Miller may have missed his mark in 2006, but he proved his commitment to style.
And Morningstar columnist Christine Benz chooses consistent style over predictable performance any day.
“Gauging performance in a calendar-year period is an extremely arbitrary exercise that informed investors should avoid,” wrote Benz. “A great manager’s year-by-year performance will generally be a lot less consistent than his strategy,” she wrote.
Benz applauds Miller for recognizing that to beat the benchmark, stock-pickers have to bet against it. Miller’s fund lagged the S&P 500 by nearly 10% last year, but he never strayed from his philosophy for short-term gain.
“The conviction Miller shows in his approach, as well as his willingness to diverge meaningfully from the consensus view, is the hallmark of all great investors,” said Benz, adding Marty Whitman of the Third Avenue Value Fund and Fidelity’s Contrafund captain Will Danoff to the group of greats.
“None of this is to suggest consistency isn’t a virtue. Confident positive returns and capital preservation—the goals of cautious managers such as cautious managers such as FPA New Income’s Bob Rodriguez and former First Eagle manager Jean-Marie Eveillard are obviously important to risk-averse investors. But that kind of consistency reveals itself in absolute returns and volatility-related statistics like standard deviation—not by looking at how a fund has performed relative to a beer group or benchmark,” wrote Benz.
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