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Legg Mason reported on Thursday that long-time Value Trust fund manager Bill Miller will be stepping down in April of next year. Miller has been with the firm since the early 80's and had an impressive streak of beating the market for 15 consecutive years from 1991 through 2005. But he's given all of that outperformance back over the last few years, including a devastating 55% loss in 2008.

Over the last few years Miller had shifted to more of a growth manager who didn't mind high valuations because the companies would be worth much more 5-10 years down the road. And when many of these glamour stocks couldn't deliver the growth that was expected (and they often don't), Miller would often double or triple down, making his mistakes even worse.

Miller got caught up in value traps too. Hindsight is always 20/20, but here's an article from late 2007 where he was touting bank stocks, Freddie Mac and homebuilders. Ouch. That's a good example of why you should avoid companes with significant negative estimate revisions. Sometimes stocks are "cheap" for a good reason.

This just goes to show that even experienced investors like Bill Miller can fall victim to paying too much today for tomorrow's growth and getting caught in value traps!


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