Bill Miller and Dip Buying
There is an interesting observation in Barron's about mutual fund manager Bill Miller:
“The secret to Miller’s success was that he never gave up on a stock. The more it tumbled in price, the more he bought. So when the stock finally turned upward, Miller held a boatload of shares,”I've written about Bill Miller before as an example of the naive buy-the-dips approach to investing taken to its logical conclusion.
- It is clear that Bill Miller and Legg Mason do not understand what is happening and haven't for a long time. Their strategy worked well during a multi-decade bull market where the key to success was to "buy the dips"
- Unfortunately for them, the bull-market only investing genotype is going to be an evolutionary dead end. Investors need a money manager whose style contemplates severe bear markets, otherwise they are doomed to severe capital impairment. Picture a plane crashing into mountain with full afterburners on.
- Were these managers, like Bill Miller, really just optimized for a credit bubble?
2 comments:
If you sell before the bottom of the next dip you'll be doing OK. Stops do that for you automatically. After a little while of getting stopped out you'll get the idea. Or should.
Investors need a money manager whose style contemplates severe bear markets, otherwise they are doomed to severe capital impairment.
I have been contemplating it!
Picture a plane crashing into mountain with full afterburners on.
I have been picturing it!
Since you shared quotes, I feel the need to share one of my own.
Yes. Well, they're probably experts at building things, whereas I'm an expert at blowing them up, and you can take it from me that one would need a good eight hours to make a decent job on that bridge. - Miller, Force 10 from Navarone
D'oh! ;)
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