Bill Miller's Hedge Fund Surges 46% Riding Amazon, Bitcoin Wave

(Bloomberg) -- Legendary investor Bill Miller is bringing his winning touch to the hedge fund business.

The fund that he launched three years ago has gained 46% in the first half of this year, according to an investor document seen by Bloomberg.

That’s enough to make plenty of people in the hedge fund industry jealous.

Miller, 69, has found success by following the same playbook he used during his three-decade run at Legg Mason: picking beaten-down securities that trade at a large discount to their intrinsic value.

Among his top positions are Amazon.com Inc. -- a stock some say is undervalued even with its double-digit gain this year -- and ADT Inc., the security system company that plummeted in March on a weaker-than-expected earnings outlook.

Bullish wagers on Bitcoin and Avon Products Inc. also led his gains through the first half, according to the document. Miller has long been a fan of the cryptocurrency. It reached an 18-month high in June, surging above $13,000. In May, Avon agreed to be acquired by rival beauty-care company Natura Cosmeticos SA. It has returned 155% through June 30.

‘Excellent Opportunity’

Miller said the current environment looks positive for stocks.

“With the economy growing modestly, the Fed about to embark on an easing cycle and inflation quiescent, the extreme diversion in valuations between bond proxies such as utilities and consumer staples and cyclical value stocks, is likely to begin reversing,” Miller said in an email. “This represents an excellent opportunity for investors to earn excess returns.”

He declined to comment on the fund’s performance or specific investments. The fund has assets of $126 million. In total, Miller oversees $2.3 billion at his Baltimore-based firm.

Notching a double-digit gain hasn’t come easy for Miller. The fund’s monthly performance has been volatile. It surged about 39% in June after falling 29% the month before partly because the fund uses one to three times leverage on its investments.

In its short lifespan, the hedge fund has had its ups and downs. It soared 182% in its first full year of trading in 2017 and lost 34% last year as stocks sunk, according to the investor document. The S&P 500 declined 4% with dividends in 2018.

Miller gained fame beating the S&P 500 for 15 straight years when he ran the Legg Mason Value Trust. He ran into trouble during the financial crisis, losing 55% in 2008 and triggering redemptions.

The stock-picker is still making his mark in the mutual fund world. His Miller Opportunity Trust, which has $1.5 billion in assets, is up 18% this year through July 24, beating almost 90% of its peers, according to data compiled by Bloomberg.

To contact the reporter on this story: Melissa Karsh in New York at mkarsh@bloomberg.net

To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, Josh Friedman

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