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To: E.J. Neitz Jr who wrote (39599)	5/15/2002 8:19:19 AM
From: E.J. Neitz Jr	Respond to of 53068

One of the best fund managers and his recent buys: Legg Mason's Miller Likes Tyco, Nextel and Other Laggards By IAN MCDONALD THE WALL STREET JOURNAL ONLINE After two down years, Bill Miller still doesn't think stocks are cheap -- and he's still sticking his shareholders' money in downright nasty places. Mr. Miller, manager of the $11.3 billion Legg Mason Value Trust fund, the only fund manager to top the S&P 500 in each of the past 11 years, says he sees "no evidence of broad mispricing in traditional growth or value stocks," in a shareholder report filed with regulators Tuesday. These days, Mr. Miller is finding "mispricing" in some of the stock market's dreariest corners, including drubbed telecom stocks like Nextel, trounced utilities like AES, and his newest addition to the fund, Tyco International, which is down 69% since the beginning of the year thanks to questions about its accounting. Although he is trailing the S&P 500 since Jan. 1, Mr. Miller's moves are closely watched because of his streak and distinctive "relative" value style. While many bargain-hunting value managers shun pricey and volatile shares of technology or telecommunications outfits, Mr. Miller takes a broader view, looking for companies that seem to be cheap relative to what he thinks their future cash flows will be. The approach has built the streak and led him to controversial picks like Amazon.com, where he bought more shares as the stock rose some 40% in the first quarter. It also usually leads him far from the market's current sweet spot. "Bargain prices do not occur when the consensus is cheery, the news is good, and investors are optimistic," Mr. Miller writes in the shareholder report. "Our research efforts are usually directed at precisely the area of the market that the news media tells you has the least promising outlook, and we are typically selling those stocks that you are reading have the greatest opportunity for near-term gain." Legg Mason officials did not return a call seeking comment. True to form his only addition to the portfolio in the first quarter was Tyco International, which he believes is a victim of the media's "witch-hunt" to find the next Enron. On March 31, 3.7% of the fund was invested in the embattled conglomerate. At the same time he eliminated his positions in Berkshire Hathaway and Dell Computer, which had risen 15% and 5% over the past 12 months, outperforming the index . The same can't be said of Mr. Miller's fund, which currently trails the S&P 500 and more than 90% of his large-cap value peers over the past one and three years, according to Morningstar. His fund is down 18.9% over the past year, compared to a 12.7% loss for the S&P 500. The fund averages a 7.2% annualized loss over the past three years, compared a 6.7% annual dip for the index. Today he sees value in companies where he thinks earnings will rise higher than expected as the economy improves. That includes the likes of Eastman Kodak and JP Morgan Chase where a combined 7% of the fund's assets were invested on March 31. This batch of companies also include those in the telecommunications equipment business where he owns the likes of Corning, Tellabs and Lucent Technologies. On March 31 the fund's telecommunications equipment stake was a 3.3% position. Mr. Miller also points to the unloved utility area where Enron-spooked investors have fled in droves. His only utility holding on March 31, aside from telecommunications stocks, was AES where 3.7% of the fund is invested. The stock is down 84% over the past 12 months, but Mr. Miller notes that he and assistant manager Nancy Dennin "bought aggressively in the single digits." "We believe the sell-off in the utility arena is very similar to the bank group sell-off in 1990 when a handful of banks failed," he writes. "Investors who bought banks on the panicked selling were handsomely rewarded." Finally, Mr. Miller points to companies whose "growth characteristics in terms of stability, duration, or magnitude are under-recognized." He points to United Health Group and Waste Management as examples, his top two holdings. About 13% of the fund is invested in the two stocks on March 31. At the end of the first quarter the fund's largest sector weighting was financial services, with 32% of the fund's assets. His top holdings in the sector on March 31 were insurer MGIQ Investment Corporation and bank Washington Mutual, with roughly 10% of the fund invested in the two stocks. Write to Ian McDonald at ian.mcdonald@wsj.com Updated May 14, 2002 9:40 p.m. EDT