His untimely stock pick for financials caused him to underperform severely. Basically, the last 5 years, he missed out on the natural resources and oil & gas sector boom, started holding substantial amount of financial companies and building companies early in 2007. Averaged down on these sectors when prices declined significantly, piled a few percent of his portfolio into Freedie Mac alone, which later went to almost zero, and has positioned the portfolio for rapid recovery way too early.
For a good summary of what happened in 2007 (hey that's 2 years ago), read this Bill Miller's 4th Quater 2007 commentary.
His decision that "What took us into this malaise will be what takes us out." laid the path of further underperformance in 2008. What got me pissed is that during the 1Q 2008 letter, Miller quoted his friend as saying his underperformance is just a form of “You mean, your deferred outperformance,”. It shows a form of misplaced arrogance. A hubris that is timely punished by a unmerciful market.
However, look at the honesty Miller displayed in this 3Q letter, "Our portfolio has performed worse than most others, and worse than I would have imagined, in this current financial crisis. It has suffered from my overall optimism, long-term orientation, and inability to anticipate the depth and duration of the financial crisis in time to take proper action to mitigate losses."
Why have i stuck to Miller over the past 2 years? My answer is sure dissatisfactory to any rational investor. Why Miller? over the over 10+ value funds that i admire, only Value Trust is offered in Singapore. The rest has SEC and MAS regulation governing against unaccredited Singapore investor from owning it.
Why did i not sell when he wrote his super arrogant letter? Cuz i'm stuck with the notion that i've already paid 2% commission on it, the net asset value per share has fell by over 30%, and if i sell and it goes up, i'll bite myself. Totally irrational portfolio decision.
Why am i still holding it? Cuz i like the new portfolio mix now. He's defensive, but not TOO defensive. I understand most of the rationale for the stocks holding in the Value Trust, and mostly agree with them. I'm still shackled by my damned bias to make full rational decisions. And i think Miller will perform well after this crises. He's super smart and i think honest, he'll do well...or i wish i hope.
On a lighter note, I'm absolutely thrilled about my lessons at Ivey. I love their case method which is used to teach both technical subjects (derivatives and value investing) and the general business management courses. I'm amazed at the level of preparedness of the students in here. By end of discussions, the profs will then go through their slides, and i see that most if not all the key issues are discussed and 'taught'.
And i must say that i'm so lucky to done AFA in SMU last semester. The ability to tackle a tough subject on my own makes learning so much more fun as we can then move pass the 'how to' and move into the 'why;. And given that Prof JJ tortured us with the crazy amt of readings last sem, now reading case and academic journals are just plain fun. haha. A classic case of 先苦后甜。
This Thurs is projected to be -15 degrees celsius and with wind, it will feel like - 25. Think i'll have problem walking to the bus stop....burr....
There'll be a spring break from 11th Feb to 1st March, and Ontario is still projected to be in frigid winter. Thinking of going West coast in US or Mexico to escape the winter chills. Haha. Can't sell my portfolio to finance the trips. Will try to further extend my credit line with Pop and Mom finance house. Haha. Hope there won't be any credit terms or such.
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