Bill Miller's Value Trust

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Bill Miller's Value Trust

1 Performance of the Fund

The fund has performed very well over the years. In about 1986, the value of the fund stood at about $5. However, today in 2012, it is valued at about $41. This shows the considerable improvement that has come in the fund. There were only two periods in the history when the fund value slumped. The first one was in 1988 when the value of the fund dipped to become equal to about 11%. Then, the fund also slumped again in 1991 where it had become equal to about 12%. After that, the fund value only increased with time. Another cycle came in 2003, when the fund had become equal to about $35. This was followed by the last trough in its cycle which came in 2009 and it dipped to become equal to about 21%. The trend is given in Figure 1.

Figure 1: Five year performance of LMCMV

The highest point of the fund had occurred around 2007 when it had become equal to a whopping $79. The same highs were also reported in the period of 2000. At that time, the fund had also reached the highs of around $75.

Yet, the stock also considerably changes everyday. This is because of the trading that occurs in the stock. There is too much daily fluctuation and in a single day it can go about half of its value. Still, it is quite a stable fund when seen over medium-term periods such as during a given month. It is currently hovering at about $41. Figure 2 shows its weekly performance.

Figure 2: Weekly performance of LMCMV

The last value of the stock was $41.38 on 23 October 2012. Since, July and October 2012 it has hovered between $39 and $42. However, it is clear from the analysis that the fund is successful as it only shows growth when seen over a period of time. The same result was also clear when we saw the performance of the fund over the past 5 years.

Yet, an analysis of the listed fund with respect to its opening and ending values indicates that there is not much variability in the price of the fund within a given day. Even when too much trading occurs in the fund share, it remains considerably stable. This hints to the professional management of the fund. The standard deviation of returns is minimal, rather about negligent (Yahoo Finance, 2012).

2 Bill Miller's Strategy

Bill Miller realizes that the stock market is quite efficient. Accordingly, most of the information is quickly included in the prices of the stock including that of the funds and there is no or not much room left for the player to manipulate this strategy. However, there is also some short-term inefficiency. These stem from the transient inefficiencies that result in the market. For example, many a times the investors do not converge on the value of the fund stock, this is when they panic or ...