Bill Miller: Large-Caps at Once in a Life Opportunity (LM, XOM, KMB)

Legg Mason Inc. (NYSE: LM) portfolio manager Bill Miller has gone out on a limb in his July investing outlook.  Although Miller’s observations do have many truths when it comes to value investing, many value investors and large-cap investors now know that investing solely because an asset is cheap may not keep it from getting cheaper.  Miller wrote in his July outlook that U.S. large-cap stocks “represent a once in a lifetime opportunity in my opinion to buy the best quality companies in the world at bargain prices.”  Stocks discussed were Exxon Mobil Corp. (NYSE: XOM) and Kimberly Clark Corporation (NYSE: KMB), and other sectors were mentioned.

Miller noted that the last time stocks were this cheap relative to bonds was in 1951, back when he was one year old.  Interestingly, Miller may have not meant to outline “you rich folks” in a political statement, but this is a solid example of where that $200,000 per year cut-off came from in politics:

• “The typical Wal-Mart shopper spends about all he or she earns, so their spending depends on having a job or getting a raise. But the top 5% of the population, those making more than $210,000, account for about 33% of total spending.”

Miller also noted that consumption is around 70% of GDP, and that U.S. economic growth relies heavily on a consumer able and willing to spend.  Miller is sticking with the thesis that financials will lead the rally, or will lead the market to further languishing.

JON C. OGG