Top portfolio manager David Miller didn't need to win the Lipper Fund Award two years in a row to prove he was ahead of the competition.
Mr. Miller's multi-strategy fund has been in the top 1% for the past five years, according to Morningstar, and that's not just because of a good year or two. Instead, they have been in the top 2% in four of the past five years, and if they continue their success in 2024, they will be within range of top five in six years.
In a recent interview with Business Insider, Miller explained that this outperformance was no coincidence. The fund manager has not strayed from the offensive and defensive strategy he outlined last summer, and is still baffled as to why other fund managers haven't followed suit.
“When it comes to playing basketball or football, you can't imagine not playing defense when the other team is playing offense,” Miller said. “And the really strange irony is that we all know that it's completely common sense in playing sports, yet we actually employ such offensive and defensive strategies. There are very few, if any, investment trusts that do.
Rather than buying or shorting stocks directly, Miller employs a trend-following strategy that rides the positive or negative momentum of major indexes in the U.S., Europe, and Japan. This takes the pressure off of stock selection and allows you to win in any market environment.
“You can try to pick the next Apple or Amazon, but there's a really big problem with trying to pick the next Apple or Amazon. It's that there are thousands of stocks out there, and virtually all of them are “There are only a few dozen stocks in the entire stock market that generate a profit of 10%,'' Miller said.
The top fund manager added: “So people come to the conclusion that they should just create an index and put everything in the S&P 500. And frankly, it's worked out pretty well. But the problem is, what's in the S&P 500? If you were in the S&P 500 from 2000 to 2002 or 2008, there is a point where you could lose half your money.”
Important tips for generating income
In addition to riding positive or negative trends in global stock markets, Miller said he also incorporates arbitrage and income-focused strategies that are uncorrelated to equities. Diversifying in this way reduces risk while also increasing returns, the fund manager said.
“If you have a one-legged stool, a two-legged stool is better, but a three-legged stool is certainly much better in terms of stability,” says Miller. To tell.
Miller's arbitrage approach, which involves borrowing in countries where interest rates are low and lending in countries where interest rates are high, cannot be easily copied by retail investors. Indeed, Mr. Miller's company, Catalyst Fund, is partnering with French bank BNP Paribas to accomplish this task.
But Miller has an approach to income generation that anyone can implement. He makes money by buying corporate bonds, which have higher yields than U.S. Treasuries but are safer.
“That's exactly where we want to get a little bit better return than Treasuries and put our cash away and get more than five times the yield on our equity,” Miller said.
By investing only in financially sound companies, Miller no longer needs to focus on return on capital.
“If you can be in a company with very little credit risk and a very short time horizon, you can be pretty confident that you can get a little bit better return without really increasing your risk lever,” Miller said. said.
There are several considerations when considering corporate bonds, including the issuing company's debt load, cash flow and industry, Miller said. Miller explained that it is safer to buy bonds of non-cyclical companies, which are not subject to fluctuations in business cycles.
“What I'm more concerned about is not how big they are, but how well-capitalized they are, how much cash they have relative to their total debt,” Miller said. “If you have twice as much cash as you owe, it's pretty hard to go bankrupt because you have enough cash to pay off your debt today if you need to.”
After explaining the process of selecting corporate bonds, Mr. Miller listed several companies with attractive debt.
website domain seller verisignMiller said the company's product, which yields 5.25%, is at the top of the list because it has minimal debt and generates reliable recurring cash flow. he also constellation brand, which sells Corona and Modelo in the United States, takes into account that alcohol demand does not increase or decrease with business cycles. Companies in defense sectors such as daily necessities and healthcare. mcdonalds and HCA HealthcareIn Miller's view, some debt is worth buying.
