By Jason Zweig | Oct. 27, 2017 11:32 am ET
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Fund manager Bill Miller, who beat the market for 15 years in a row only to lose 55% in 2008, is bullish on bitcoin.
The former manager of the Legg Mason Value Trust mutual fund, Mr. Miller now runs his own investment firm, Miller Value Partners LLC, in Baltimore. Among its $2.3 billion in assets is a $154 million hedge fund, MVP 1. The fund is up 72.5% so far this year, Mr. Miller said in an interview. It has about 30% of its assets in bitcoin, he said, up from about 5% in 2016.
In his latest letter to the hedge fund’s investors, released this week, Mr. Miller said the fund paid an average price of about $350 for its bitcoin, which traded on Friday morning above $5,700.
He isn’t buying more for the fund at these prices, although he noted in an email that if he didn’t already own bitcoin in his personal account, he would be willing to “put 1% of my liquid net worth in it here.”
In the letter, Mr. Miller pointed out that a “Murderers’ Row” of revered investors have been declaring that bitcoin is overpriced or a “bubble,” including Berkshire Hathaway Inc.’s Warren Buffett, James Dimon of J.P. Morgan Chase & Co. and Laurence Fink of BlackRock Inc., Bridgewater Associates’ Ray Dalio and Howard Marks of Oaktree Capital Management.
“My view on bitcoin is that it is a technological experiment that may or may not prove to have any long lasting value,” Mr. Miller wrote in his letter. “Bitcoin has a market capitalization greater than 90% of the companies in the S&P 500, but it still might fail. I don’t know and neither does anyone else, no matter how certain they are of their opinion.” As of Friday, Bitcoin had a total value in circulation of approximately $96 billion, according to coinmarketcap.com.
Added Mr. Miller, “I believe there is still a nontrivial chance bitcoin goes to zero, but each day it does not, that chance declines as more venture capital flows into the bitcoin ecosystem and more people become familiar with bitcoin and buy it.”
Mr. Miller has some credibility when it comes to spotting value in assets that other investors regard as overpriced. In the 1990s, he was among the few value investors specializing in cheap companies who dared to buy hot technology stocks like AOL and Amazon.com.
On the other hand, his Legg Mason Value Trust racked up horrific results during the financial crisis with big bets on American International Group, Eastman Kodak and Freddie Mac.
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Chapter One, “Investment versus Speculation: Results to Be Expected by the Intelligent Investor,” in Benjamin Graham, The Intelligent Investor
Robert J. Shiller, Irrational Exuberance
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