Consuelo Mack of Wealthtrack had a very interesting, and quite lengthy conversation with Legg Mason’s infamous mutual fund manager, Bill Miller. His Legg Mason Opportunity Trust mutual fund has risen from the ashes of a horrible 2011 loss of 34% to become the top performer in 2012; up 41% last year.
Mack noted that investor bullishness regarding the stock market has been on the rise leading to a shift in mutual fund flows towards stocks.
Miller proceeded to discuss his interest in housing stocks and his bullish view of airline stocks.
Miller explained why the bond bubble is as big as the housing bubble in 2005 and the internet bubble.
Miller talked about the stock market being “the only game in town” and mentioned the risks to his bullish scenario.
Miller touched on Apple (AAPL), the “Dr. Jekyll and Mr. Hyde of the stock market,” and their “dumb capital allocation.” Miller predicted Apple would rise 50% with sensible capital allocation.
Miller said he added Ford (F) to his portfolio in the 4th quarter based on his view earnings will rise for years. He noted that Ford trades at 2.5 to 3 times EBITDA and should easily be 50% higher.
Mack asked Miller to comment on the disastrous performance of his funds in 2008 and 2011 and what he’d do differently to avoid a repeat. Miller discussed the idea of using hedges to mitigate risk.
Finally, Miller recommended the iShares S&P 100 Index ETF (OEF) as a way for investors to get exposure to extraordinarily cheap, large cap equities, or the best risk/reward opportunity in his opinion.
Back in April 2012, Miller discussed the various risks around the world which he saw receding [link].
Below is the interview which was taped on January 24, 2013: