Legg Mason Cap Mgmt Value CLMVTX

Morningstar Rating

Fund Research and Analysis

by Bridget B. Hughes, CFA

Legg Mason Value is topping the charts this year, reflecting management's bold style.

Since early March 2009, this fund has posted a fantastic 80% return through Oct. 2, 2009. That puts it well ahead of the S&P 500 Index, with its own 51% gain, and the vast majority of its large-blend peers, which have also notched a 51% advance, on average. Read more

Kudos

Long-tenured, successful portfolio manager.

Management can be wrong, but it is circumspect about its mistakes. Read more

Risks

At times, the fund has held large positions in individual stocks, exposing it to more company-specific risk than its typical rival.

Management's willingness to hold stocks that some might deem expensive and to venture into risky sectors have made the fund fairly volatile.

High expenses due to a level load give the fund a sizable hurdle to overcome (though Legg Mason recently introduced A shares that have a lower expense ratio). Read more

Strategy

Bill Miller looks for companies that are trading cheaply relative to his estimates of what they are worth. This can lead him to beaten-down turnaround plays. Unlike many value managers, Miller is willing to make fairly optimistic assumptions about growth, and he doesn't shy away from owning companies in traditional growth sectors. Read more

Management

Bill Miller took sole control here in 1990, after serving as a comanager since the fund's 1982 inception. As the fund extended a calendar-year streak of beating the S&P 500 Index between 1990 and 2005, Miller reached celebrity status in the mutual fund world--one reason why this fund's subsequent fall from grace and strength in 2009 has received so much attention. Read more

Inside Scoop

As he did in the early 1990s, manager Bill Miller is adapting his approach. He will still seek out low valuations and cash-generating firms, but he'll also emphasize dividends and cash on the balance sheet. Read more

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