Bill Miller’s Hedge Fund Returns 120% In 2019, Up 60% In Q4

Bill Miller’s reputation as the world’s most procyclical, beta-levered investor received a straight-to-the-heart injection of epinephrine after a stellar return in 2019, when his fund, Miller Value Partner 1, soared 120% according to an investor letter seen by Bloomberg News. This means that while Miller’s hedge fund uses one to three times leverage on its investments, in 2019 it cranked this up to about 4x (the S&P returned just shy of 30% last year); it explains why his fund nearly blew up in the aftermath of the Lehman crisis.

Predictably, about half of the returns was due entirely thanks to the Fed, with the Fund returning 60% in just the fourth quarter when the Fed resumed not only hundreds of billions of repo operations but also launched QE4 to boost stock prices fix the repo market. The top performers were ADT, Flexion Therapeutics and Teva.

Miller Opportunity Trust, a mutual fund with $1.7 billion in assets, was up about 34% last year. It rose about 19% in the fourth quarter​​.

In the first half of 2019, Miller returned 46%, thanks largely to Amazon and Bitcoin: his top positions are Amazon.com and ADT Inc., the security system company that plummeted in March on a weaker-than-expected earnings outlook. Bullish wagers on Bitcoin and Avon Products Inc. also led his gains through the first half. Miller has long been a fan of the cryptocurrency. It reached an 18-month high in June, surging above $13,000. In May, Avon agreed to be acquired by rival beauty-care company Natura Cosmeticos SA. It has returned 155% through June 30.

“In the 4th quarter, we did our favorite thing to do in markets: nothing,” Miller wrote in the letter, dated Jan. 15 according to Bloombnerg. “No new names and no elimination of holdings from the portfolio. This doesn’t happen as often as it probably should.”

Miller may have done nothing, but the Fed did “something”: it injected $100BN in liquidity every month, which was enough to send stocks 30% higher for 2019, a year when earnings declined and more than 100% of the upside was due to multiple expansion.

Looking ahead Miller sees stocks moving higher though not in a straight line even if the bull market continues “as I believe it will.” As of press time, the Fed has not responded to a request for comment if it will guarantee stocks continue to “move higher.”