Legg Mason Value Trust Rises Briefly

Posted by: Lauren Young on September 9, 2008

It could have been worse.

Legg Mason fund manager Bill Miller, who is known for quirky and contrarian picks, bet heavily on Freddie Mac earlier this year, and with the government’s takeover of the mortgage giant, the stock is nearly worthless.

Even so, Miller’s Legg Mason Value Trust Fund rose on Monday. Although Freddie plummeted, Miller’s fund was up 1.6% as the broader market soared on news of the bailout.

Monday’s teensy tiny gains will provide little comfort for shareholders in Miller’s fund, which is down almost 30% for the year.

But there is a lesson to be learned: Diversification works. Legg Mason Value Trust has 31 holdings, including AES, Amazon.com, Aetna, Google, and Ebay. Most of those top picks rose on Monday, so one rotten apple didn’t tip the apple cart over.

However, all of these stocks are posting double-digit losses in 2008. Only a handful of Legg Mason Value Trust’s holdings are up this year, including IBM, Amgen, and Capital One.

Unfortunately, for investors, Miller doesn’t have many ripe apples left in reserve.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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