Bill Miller: The streak looks safe
Legg Mason Value Trust should beat the S&P for the 15th straight year. Here's how Miller did it.
NEW YORK (CNNMoney.com) – Bill Miller can breathe easily. "The Streak" should survive another year.
As of December 29, Miller's Legg Mason Value Trust fund, which has famously outperformed the S&P 500 for fourteen straight years, was on track to make it fifteen in a row.
It's going to come down to the wire though. The Legg Mason Value Trust fund is up 6 percent while the total return for the S&P 500, which includes dividends, is up 5.4 percent.
Still, the fact that Miller is even in position to extend his streak is somewhat of an astonishing feat considering that the Legg Mason Value Trust fund was lagging the market as recently as late October.
Once again, it looks like Miller's love affair with high profile tech stocks (not exactly the types of stocks you'd normally find in a "value" fund) helped propel him ahead of the market. Miller was lagging the market in the fourth quarter of 2004 as well but a rally in techs pushed him ahead of the S&P 500.
Miller can particularly thank the performance of search engine Google (Research), his fund's sixth-largest holding, for getting him back in front. Google's stock has surged nearly 33 percent in the fourth quarter.
By way of comparison, the total return for the S&P 500, which does not include Google, is 2.6 percent this quarter.
Two other high profile Internet firms that Miller owns, Amazon.com (Research) and eBay (Research), are also enjoying a solid end to the year. Both stocks are up 6 percent in the fourth quarter. Amazon is Miller's third largest holding while eBay is his eighth biggest.
But tech isn't the only sector responsible for Miller's surge. Bets on financial services and healthcare have also played a large role in the fund's comeback.
JP Morgan Chase (Research), Miller's seventh largest holding, is up 17.5 percent during the fourth quarter. Health insurers UnitedHealth and Aetna are also finishing 2005 with a flourish, with both stocks up more than 11 percent in the fourth quarter. UnitedHealth (Research) is the second largest holding in the fund while Aetna (Research) ranks as number nine.
And since Miller makes highly concentrated bets (his top ten holdings account for nearly half of the fund's assets) he only needs a few big winners to create sizable gains.
A pullback in energy stocks during the final months of the year has also helped Miller's cause. There are 29 energy companies in the S&P 500 and most of them surged earlier this year when oil prices were hitting record highs on a routine basis.
But with crude prices retreating lately, the S&P Energy sector has fallen 8 percent during the fourth quarter. And that has held back the return of the benchmark S&P 500. Miller, however, has avoided oil and gas stocks so he has not been hurt by the recent slip.
So Miller's legend is set to grow even larger. But can he beat the market again in 2006 to make it a sweet 16 years in a row? Stay tuned.
Why was the market killing Bill earlier this year? Click here.
For a look at this year's fund winners and losers, click here.
For a list of MONEY Magazine's top 50 funds, click here.