Fortune calls him the "greatest money manager of our time." And his streak of 15 consecutive years of outperforming the S&P 500, which came to an end last year, appears to support such a claim. Fortunately for us, Bill Miller, lead portfolio manager for Legg Mason Value Trust (LMVTX), is not silent about the reasons for his success. Ordinary investors will find some of his insights surprisingly simple.

Back to the future
Despite currently holding significant positions in large-cap growth stocks (NASDAQ:AMZN), Hewlett-Packard (NYSE:HPQ), and Google (NASDAQ:GOOG), Miller considers himself a value investor. He discounts future free cash flows in order to determine the intrinsic value of a company, and makes valuation the bedrock of his stock selection. Where he parts company with traditional value types is that he doesn't limit himself to only considering sleepy little utilities with dividend yields that are larger than their growth rates.

When looking at Amazon, for example, Miller feels that analysts are wrong to believe that its low margins will continue forever. Or, when looking at Google, he believes it's unwise to fret about its multiples if you feel the present value of its future free cash flows exceed its current price. Far too much analysis, in his opinion, is focused on the past and not the future.

A long-term player in a short-term world
Miller backs up this belief by making long-term bets on those companies he feels are undervalued. His turnover rate of a mere 13% means that he has an average holding period for his stocks of around eight years. That's unheard of in the mutual fund world, where many managers have holding periods of just around one year.

This approach has resulted in big winners for Miller -- stocks such as Dell (NASDAQ:DELL), AOL (now a division of Time Warner (NYSE:TWX)), and Qwest (NYSE:Q) have earned great returns for his fund over the years. It will be interesting to see if recent selections like the software provider Red Hat (NYSE:RHT) and biotech company Mannkind will deliver similar returns.

So, America's greatest investor is telling us two things:

  1. Analyze future free cash flows when considering a stock. (For more on that, see this article.)
  2. Hold your positions for the long term.

This last insight is particularly powerful and may well be the key to his outperformance. Miller describes himself as a long-term player in a short-term world. Ordinary investors would do well to take a similar approach.

When asked the one piece of advice he'd offer to investors, Miller said that he believed that our economy would continue to grow over the long term and that individuals should invest with that larger picture in mind. So, the next time you get discouraged by short-term noise, think of the streak and then cover your ears.

Two more long-term guys
Tom and David Gardner also favor a long-term strategy for their Motley Fool Stock Advisor investment service. With more than 120 stocks recommended since the service began five years ago, the brothers have only issued sell recommendations on about 20 of those selections. And this strategy has paid off richly, too, allowing Stock Advisor to thrash the market by more than 35 percentage points over that time period. To see Tom and David's most recent stock picks (and the additional 100 or so active picks), try a free trial today.

John Reeves does not own shares in any of the companies mentioned in this article. He has no idea whatever happened to Bill Mueller, who used to play third base for the Red Sox., Dell, and Time Warner are all Motley Fool Stock Advisor selections. Dell is also an Inside Value pick. The Motley Fool has a disclosure policy.