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