Legendary hedge fund manager Bill Miller, who once served as a fund manager at Legg Mason and outperformed the S&P 500 index for 15 consecutive years, a record that remains unbroken to this day, is known as the "golden finger" in the history of American hedge funds.

After the outbreak of the 2008 financial crisis, Miller suffered a Waterloo, his wealth shrank drastically, and he was almost bankrupt, once being described by the market as "not being able to maintain his reputation in his later years." However, after the crisis, relying on early investments in Amazon and Bitcoin, Miller successfully turned the tables and became a billionaire again. In 2017, the fund he managed, Miller Opportunity Trust, achieved a return of 49%, ranking first among diversified investment funds with assets over 1 billion US dollars, and achieved more than 200% return in the past year.

Recently, Bill Miller published his last letter to investors, warning people that the key to accumulating wealth in the stock market is time, not timing.

In the past 40 years, Miller has been writing letters to investors, first alternating with his late partner Ernie Kien every quarter, and then writing one every quarter by himself in the past 30 years. Now he says that this task will be handed over to his son Bill Miller IV and Samantha McClamor to complete in the future. But Miller said that this does not mean he has vowed to remain silent. He wrote: "If I think there is something interesting or useful to say in the market that others have not said, I will sit in front of the keyboard again."

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Miller said in the letter that market timing is foolish, the US stock market has been rising 70% of the time in the years after World War II because the US economy has been growing most of the time. He said: "Most of the stock returns come from the sharp rise that started during the period of severe pessimism or panic, as we have recently seen in the 2020 pandemic-induced decline. We believe that the key to accumulating wealth in the stock market is time, not timing."

Miller is also optimistic about the prospects of the US stock market, he wrote: "In the past 10 years or so, most of my letters have been saying the same thing: we are in a bull market that started in March 2009 and has continued to this day, accompanied by the typical, inevitable pullbacks and corrections. It will end when stocks become too expensive relative to bonds, or when earnings decline, and neither of these situations is the case now."

Miller, who is willing to share, has also published his investment ideas into a book - "The Investment Way of Bill Miller", which introduces Bill Miller's ten investment principles.1. **Adapting Investment Strategies in Response to Environmental Changes, Yet Always Adhering to Value Orientation**

Similar to Munger's "multidisciplinary thinking model," Miller possesses an interdisciplinary thought model. In Miller's view, investors need not be confined to a particular investment philosophy; they can employ a mix of various investment strategies, but they should always be value-oriented.

2. **Emulating the S&P 500 Index by Embracing the Best and Discarding the Worst**

Miller has observed that the constituents of the S&P 500 Index adhere to the iron law of "the strong get stronger." This means that a company is only removed from the index when it weakens; as it grows stronger, it remains included. For instance, the S&P 500 Index will not reduce its stake in Microsoft simply because the company is getting larger; the index's strategy is to "let the winners keep running."

Thus, Miller concludes that the practice of adjusting the stock portfolio structure in pursuit of so-called "balance" is misguided. He has always adhered to an investment approach of "high position, low turnover, let the winners keep running, and selectively remove the losers."

3. **Observing the Economy and Stock Market, but Avoiding Predictions**

Miller believes that the stock market is made up of countless individuals and organizations, and when everyone engages in various complex interactions, it results in a multitude of unpredictable behaviors. There is no simple correspondence or causal relationship between macroeconomics and market fluctuations, making predictions futile.

4. **Seeking Companies with Superior Business Models and High Capital Returns**

Miller's criteria for an ideal company include: having a sustainable competitive advantage; having a management team oriented towards shareholder interests; having a substantial market share; possessing an advanced business model and a high rate of capital return. Miller is more concerned with the long-term economic health of a company than its short-term accounting data.

Regarding the most important financial indicators for stock selection, Miller values ROE (Return on Equity), as it reflects a company's profitability in utilizing shareholders' equity and can serve as a primary benchmark for evaluating the company's management level. He also values ROIC (Return on Invested Capital), as it eliminates the impact of financial leverage, takes into account the cost of interest-bearing debt, and more accurately reflects the company's true profitability.5. Exploit cognitive biases as psychological drivers of thought errors, rather than becoming a victim of them.

Miller believes that we all have cognitive biases, such as overconfidence, overreaction, loss aversion, etc., and even slight market fluctuations can cause us to experience extreme emotions. Miller suggests that we should understand the psychological pitfalls of human nature to avoid becoming victims of emotions and cognitive biases.

6. Buy businesses at a price that is significantly discounted relative to their intrinsic value.

Miller assesses the value of a business by considering various methods (such as price-to-earnings or price-to-book ratios, discounted cash flow, private market value, etc.) and various scenarios (optimistic, neutral, or pessimistic assumptions). Based on a prudent assessment of intrinsic value, he then makes corresponding investment decisions by comparing market value - buying when undervalued, selling when overvalued, and holding when the valuation is normal.

Miller's most important valuation indicator is the company's free cash flow. On this point, Miller and Buffett completely agree, and they both follow the textbook valuation logic of John Burr Williams: the value of any stock, bond, or company today depends on the cash inflows and outflows discounted at an appropriate interest rate during the expected asset life. In terms of investment practice, Buffett pays more attention to "current value," while Miller pays more attention to "future growth."

7. Win with the lowest average cost.

Miller adopts a "gradual accumulation" strategy when trading. When the stocks he initially buys fall, Miller will continue to buy more, and the final cost will be averaged to an undervalued range, which often results in better returns.

Miller is a true contrarian investor. Miller once admitted that the only price he would not add to is zero. Of course, Miller's confidence to "buy more when the price falls" comes from his high confidence in his own position analysis.

8. Construct an investment portfolio containing 15 to 50 companies.

Miller's positions are very concentrated. Concentrated positions mean that the market value may fluctuate more violently, but they may also yield higher returns.9. Maximize the expected return of the portfolio, not the accuracy of stock selection.

Miller's thinking about the probability of winning and losing in investment is different. Miller believes that what really matters is how much you can earn when you are right. If you are wrong 9 out of 10 times and the stock becomes worthless, as long as the 10th time it rises by 20 times, you will turn the tables. To some extent, Miller's style and approach are more similar to venture capital.

10. The principles of selling

Miller believes that there are three principles for selling stocks: the company has reached a reasonable valuation; a better stock has been found; the fundamentals of the stock have changed.

Summary

Whether it is Buffett or Miller, the common point is that they are all value investors, and their thoughts are shining with the light of rationality and wisdom. The difference lies in that Buffett's investments are mostly in traditional industries such as Gillette, Coca-Cola, and The Washington Post, and the characteristics of his investment returns are "high probability + low odds"; while Miller's investments are mostly in technology stocks such as Microsoft, Amazon, and Dell Computer, which represent the new economy, and the characteristics of his investment returns are "low probability + high odds".