After years of lagging the market, Bill Miller is winning again. His Legg Mason Capital Management Opportunity (LMOPX) fund is up more than 30% year to date and running nearly 13 percentage points ahead of the S&P 500.
"Opportunity" isn't the fund Miller is most famous for. Over 15 consecutive years, his Legg Mason Value Trust (LMVTX) beat the index -- an unprecedented streak in investing lore. Then, in 2006, the streak ended. Two years later, a bet on financial stocks led the fund 55% lower. Miller left Value Trust in April, Bloomberg reports.
Now there are signs Miller is back to buying deep value stocks at cheap prices, and "Opportunity" investors are reaping the gains. Among his bigger bets: financial services stocks (29.8% of the portfolio), consumer cyclical stocks (19.1%), and real estate (6.1%), Morningstar reports.
Yet, looking back, it appears to be a prescient call on housing that has given Miller the lift he's now enjoying. Bets on Pulte Group (NYSE: PHM ) and KB Home (NYSE: KBH ) have proven particularly fruitful. Both stocks have more than doubled as the housing market has recovered over the past year.
Can Miller start a new streak? Given the categories where he's betting biggest -- i.e., financials, cyclicals, and real estate -- much depends on an improving U.S. economy, which, again, could prove prescient.
A Bloomberg survey shows economists expect 2.1% growth this year and a 2% bump next. A similar survey from the National Association for Business Economics projects 1.9% growth during the last part of 2012, rising to 3% by next year's fourth quarter.
Miller is equally optimistic, especially when it comes to the prospects for a long-term real estate recovery. "Housing fundamentals are likely to be positive for years," Miller said in a Bloomberg interview. "The stocks have run, but in our judgment are not even close to reflecting that long cycle."