Bill Miller, the chairman and CEO of LMM, is a legendary investor who was particularly popular on Wall Street in the 1990s, as he managed to outperform the market every year between 1991 and 2005, a rather difficult achievement for an investor. However, due to the financial crisis, his fund, Legg Mason Opportunity Trust, incurred huge losses between 2007 and 2011, followed by two years of above-the-market gains. In 2014 and 2015, Miller’s fund went back to underperforming the benchmarks and, in 2016, Miller left Legg Mason, a company where he had worked since 1981. Nevertheless, Miller, who went on to found LMM, remains one of the most followed investors.
Last week, Miller was hosted by CNBC’s Squawk Box team, where he provided his take on several stocks, including Apple Inc. (NASDAQ:AAPL), Intrexon Corp (NYSE:XON), Fiat Chrysler Automobiles NV (NYSE:FCAU), and OneMain Holdings Inc (NYSE:OMF).
Miller believes that Apple Inc. (NASDAQ:AAPL) is a “cheap” stock and it is one of his largest holdings, although its large market capitalization means the stock doesn’t have a lot of room “to move the needle.”
“Apple’s a consumer brand with freedom to price. And that’s worth a whole lot more than 12 times earnings. And of course $250 billion of cash sitting there as well,” Miller said.
Moreover, the investor thinks that Apple Inc. (NASDAQ:AAPL) is one of several companies that can reach a $1 trillion valuation, although Amazon.com, Inc. (NASDAQ:AMZN) might get there faster. The company’s size also suggests that it is unlikely that it will do an M&A deal that will be large enough to create any shareholder value risk. According to LMM’s latest 13F, Miller’s fund had 8,580 shares of Apple at the end of September, as well as ‘Call’ options underlying some 3.54 million shares. Overall, 145 funds tracked by Insider Monkey were bullish on Apple Inc. (NASDAQ:AAPL) heading into the fourth quarter of 2016, up by 29 funds over the quarter.
Intrexon Corp (NYSE:XON) is another company that Miller is fond of, with LMM holding some 3.07 million shares worth $86.16 million as of the end of the third quarter of 2016. Miller is bullish on Intrexon because of its “portfolio of options”, with products that are about to hit the market in the near future, including a topical capable of painless tattoo removal. However, Intrexon Corp (NYSE:XON)’s stock has plunged by over 39% in the last 12 months and, overall, it does not seem to be very popular among smart money investors, with just 10 funds from our database long the stock at the end of September, compared to 16 funds a quarter earlier.
On the next page, we are going to take a look at Miller’s take on his top automotive pick, as well as his opinion about the housing market.
Then there’s Fiat Chrysler Automobiles NV (NYSE:FCAU), which Miller believes will increase by 50%-100% in the next 12-18 months due to the high probability that the company will hit its 5-year plan. Fiat Chrysler is producing a lot of vehicles in both Canada and Mexico and has announced plans to relocate some production to the U.S., but Miller is not worried about the possibility of an import tax being imposed and said that it will hit all automakers. Miller also praised Fiat Chrysler Automobiles NV (NYSE:FCAU)’s partnership with Google over the development of a self-driving car. LMM held around 4.96 million shares of Fiat Chrysler Automobiles NV (NYSE:FCAU) and 31 funds tracked by us were bullish on the stock at the end of the third quarter.
OneMain Holdings Inc (NYSE:OMF) represents the perfect “Trump stock” according to Bill Miller, since it is the largest subprime lender and could gain more ground if wealth becomes more widely distributed as Trump promised. LMM owns 2.83 million shares of OneMain Holdings Inc (NYSE:OMF), according to its most recent 13F filing. The stock is currently trading at around $22 per share, down from over $40, which it traded at for the bulk of 2015. Miller thinks that in a couple of years, the stock could reach $60 per share. A total of 19 funds from the Insider Monkey database held shares of OneMain Holdings Inc (NYSE:OMF) at the end of September.
Miller thinks that the housing sector also has a lot of opportunities for investing. Millennials have started to buy houses and the availability of mortgages is increasing, although at the same time home prices have also been growing. “With the housing industry where it is in its cycle, you still have probably several years of double-digit earnings growth,” Miller said. Among stocks that could be worth more attention, Miller pointed out Lennar Corporation (NYSE:LEN), PulteGroup, Inc. (NYSE:PHM), and CalAtlantic Group Inc (NYSE:CAA), among others.
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