• Jeff Matthews

“Fund Big Slams Streak-Man!!!!!!” The Headline That Didn’t Make Headlines

Wick is short Eastman Kodak (EK), which he says isn’t gaining traction in the printer business and continues to be hurt by the digital-photography revolution. Wick notes that Legg Mason Value Trust (LMVTX) holds 7.5% of Kodak’s shares, while Legg Mason as a whole owns close to 20%.

At Value Trust Bill Miller’s legendary streak beating the S&P 500 has been replaced by extended under-performance. Wick thinks that Miller eventually will go. When he does, the Kodak stake could follow, pressuring the shares. [Emphasis added.]

—Eric Savitz, Barron’s “Technology Trader” Column, 10/8/07

The “Wick” quoted above is Paul Wick, veteran Seligman technology fund manager who, while widely quoted in the popular press, is no mere talking head. Paul is a familiar face at technology conferences around the globe, doing the homework that has kept him at the head of the pack over many years’ worth of investing in leading edge companies, as well as betting against them when he sees fit.

That’s right: unlike most public figures in this business, Wick not only talks up stocks he likes and explains why he likes them; he is not afraid to talk about stocks he doesn’t like, and why he doesn’t like them—a highly unpopular thing to do in a world that would rather shoot the messenger than listen to what the messenger is actually saying.

The ‘Bill Miller’ referenced above is, obviously, Bill Miller, the star Legg Mason money manager whose famous, enviable “streak” of S&P-beating years ended in 2006.

Like Wick, Miller is widely quoted in the popular press, though less so nowadays than during his “streak” years, when he was often asked about, and shared, his erudite views on everything from where oil really comes from to why his fund is the single largest shareholder of one of Wick’s favorite shorts—Eastman Kodak.

Regarding the latter subject, Miller says Kodak is doing a fine job in its “transformation into a digital company” and possesses “the best portfolio of products” in the field.

Regarding the former subject—where oil comes from—Miller subscribes to the view of Thomas Gold, author of the impressive-sounding “abiogenic” theory of petroleum. The “abiogenic” theory holds, as Miller has written, “that oil and gas are not fossil fuels” at all, but were “created deep inside the earth, and other planetary bodies, and gradually rise toward the surface.”

Being the opposite of the “biogenic” view that oil and gas result from the slow cooking of a finite amount of prehistoric organic matter via millions of years worth of compression into hydrocarbons as solid as coal and as amorphous as natural gas, abiogenics holds that the supply of oil and gas from whatever created it is “virtually inexhaustible.”

NotMakingThisUp will give Bill Miller his due any day, on any topic, particularly his notion that limiting “value” investing to currently cheap stocks ignores many faster growing, high return-on-capital businesses with a better-than-random chance of proving to be excellent “value” investments years hence. That is a view for which he took some heat during his ‘streak’ years, although his investors didn’t mind the end results. However, having started in this business touring oil shale deposits in Colorado and offshore drilling rigs on the Grand Banks, it’s always astonishing to hear of anybody who still pays attention to a crackpot theory long ago dismissed by scientists studying the field of oil and gas, not to mention oilmen looking for the stuff. After all, if oil and gas really do come from some mysterious self-plenishing spring deep inside the earth and not from ancient reservoirs of compressed organic matter cooked into burnable, transportable fuel, then somebody ought to tell Brazil they shouldn’t be able to make all that ethanol out of sugar cane.

Nevertheless, both Wick and Miller have had extraordinary careers in this business, and both have opinions and investment ideas worth following.

Which is why, when Eric Savitz, who is no slouch himself as a reporter, quotes one saying he thinks the other “will eventually go”—well, that’s a headline if ever there was one.

Now, it’s understandable why Barron’s didn’t overplay the matter. The mutual fund world is, at least on the surface, a genteel playground where portfolio managers let their performance do their public talking.

If Barron’s had wanted to sell a few extra copies—except in the general vicinity of the Legg Mason offices—they surely would have slapped Savitz’s quote on the front page beneath some kind of cute graphic, possibly showing gunslingers circling one another warily, with a headline along the lines of:

Shootout At The Mutual Fund Corral! Of course, if NotMakingThisUp’s official Newspaper of Record—the New York Post—had picked up the story, it would have gone with a juicier headline in a “Pearl Harbor Attacked”-sized font…something like:

Fund Big to ‘Streak-Man’: “You’re Outta Here!” And if our personal favorite publication, though one not generally attuned to the nuances of portfolio managers and their latest investment ideas—The Onion—had covered it, the headline would be somewhat more twisted. Perhaps:

Wick Says Miller “to Go”…Miller says Wick “Probably Not Organic Matter”

We, on the other hand, ain’t taking sides.

Jeff Matthews I Am Not Making This Up

© 2007 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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The content contained in this blog represents only the opinions of Mr. Matthews. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. The content herein is intended solely for the entertainment of the reader, and the author.

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