Bill Miller is chairman of Legg Mason Capital Management, a division that owns six mutual funds. Miller is in charge of the value trust fund and the smaller opportunity fund (Opportunity Trust).

Miller is famous for the unprecedented success of the value Trust (Legg Mason Value Trust) over the S & P 500 for an unprecedented 15 years in a row. But what we find most attractive is the stability of the fund's excess profit margins-going back to the past three, five, 10 and 15 years.

However, like many other mutual funds and fund managers who emphasize buying high-quality / high-return companies, according to Morningstar (Inc), Mayson value trusts have lagged behind 12.5% and 11.2% of the S & P 500 and their fund classes, respectively, since the beginning of the year. So the fund's winning streak over the S & P 500 is in danger of being interrupted again.

But there is a kind of continuity, and there is no danger of a quick end at any time, that is, almost everything Miller says fascinates us and gives us inspiration.

If you are a long-term investor, at least you can learn a lot from management.

You can learn a lot from management-in the long run

Chairman of the meeting:Some fund managers don't talk to management, but you'll find it useful. Can you tell us how you did it? Is this an effective way to add value to you?

Bill Miller:The longer the time span, the more effective it will be-because I don't think you can get a lot from talking to management in a short period of time. In a very short period of time, management was subject to the Information Disclosure regulations (Reg. FD), and in the short term, you can't understand the background of that particular CEO or CF's past behavior-again, if you're new to the company and in the short term, you can't get a lot from talking to management.

I think if you have owned a company for three, five or 10 years and have had a lot of in-depth contact with management, you can learn a lot from the subtleties of the way they answer questions, the way they think about business strategy, and so on.

We found that Amazon.Com Inc (Amazon) is on the offensive.

Miller:'in our business, ignorance is not a virtue, and I totally agree with that, 'Mr. Buffett said. (chuckles) knowledge from any source, information from any source is useful, as long as you understand its advantages and disadvantages. What these companies do is try to show their best and best, and management will hardly tell you how bad things are.

So you should try to understand how they think about business and how their views have changed in recent years.

A few years ago, for example, Amazon.Com Inc's share price fell to about $7-8, and we were the largest shareholder after its chairman, Jeff Bezos. At a dinner I asked him, "Jeff, what are you spending your time on these days?" "Oh, unlike last year I spent a lot of time on our financial situation (cash flow), I spend a lot of time on customer experience these days," he said. "

I thought, "that's good. "it tells me that he is no longer worried about the financial situation of the company. to put it simply, he has been defending for the past 12 months, and now he has finally shifted from defense to offense.

What the price of this stock tells people is that it is still on the defensive. So, when we consider investment, this is very important information.

At present, no one cares about Pfizer Inc Pharmaceutical Company. to us, it seems to be a very easy stock to buy.

In the pharmaceutical industry, lower R & D reserves mean lower returns

Chairman of the meeting:Is there anything else you want to find that you are not going to leave until you know it? You are interviewing them and increasing your knowledge, not to get inside information but to increase your chances of knowledge.

Miller:In fact, it's all about long-term insight. For example, Hank McKinnell of Pfizer Inc Pharmaceutical (Pfizer), former CEO of Pfizer Inc Pharmaceutical, came to see us, and he also brought his entire management team, including their chief medical officer. And we are not the main shareholder of Pfizer Inc Pharmaceutical, we have hundreds of millions of dollars in Pfizer Inc position, but it is not in our largest positions in the stocks.

One of the things he talked about is R & D reserves in the pharmaceutical industry, and we have been bearish on pharmaceutical companies for years because we realized that for most of the past decade, the marginal output rate of R & D reserves has been on a steady downward trend, which is one of the reasons why its price-to-earnings ratio has shrunk-because it is essentially a window into the future marginal return on capital.

But now there's a lot of evidence that it's picking up.

Miller:I asked, "what's different about the business-what should we know? What is it that people don't understand? "what they don't understand is that our marginal R & D output is picking up in R & D reserves characterized by a long time span," he said. "

If this is true, the impact will undoubtedly be enormous. So I said, "do you have any evidence to prove it? "of course," he said. He gave data on how many drugs that can enter the stage Ⅰ can enter the stage Ⅱ. In the past, 40% of the drugs in the stage Ⅰ can enter the stage Ⅱ. Now, due to the new drug development process, almost 70% of the drugs that can enter the stage Ⅱ.

Then Pfizer Inc Pharmaceutical released a report that they actually improved their financial guidance-which is really interesting because they sold their consumer products division, which is valued higher than their pharmaceutical division. When they released the report, they moderately raised their financial guidelines and mentioned their reserves. So now there is a lot of evidence that it is picking up.

The implied rate of return (implied rate of return) of Pfizer Inc Pharmaceutical makes it very easy for us to buy.

Miller:By a simple measure, Pfizer Inc Pharmaceuticals has the lowest price-to-earnings ratio among big pharmaceutical companies, and it now has the highest dividend yield (dividend yield), or certainly one of the highest dividend yields.

They announced that they would buy back $17 billion worth of shares, but did not say exactly what they would do with the dividend yield, giving only a strong hint that dividend growth would be at least double digits.

In that case, how much is the valuation likely to fall? I think the answer is that it doesn't fall much-especially if the marginal output rate of capital rises. If the dividend starts at a 3.5% yield with double-digit growth and the valuation does not fall, it has an implied return of nearly 14% compared with the 7% or 8% implied return for the market as a whole. This seems to be a fairly easy stock.

The problem now is that no one really cares about Pfizer Inc Pharmaceutical at the moment. It has performed poorly in the past few years, so everyone says, "there is no sense of urgency." Who cares? "but for us, the most important thing is the implied rate of return compared to the market as a whole-because that's where we want to invest more assets than other options.

Chairman of the meeting:And the news that they are increasing dividends is not a bad sign.

Miller:No, it's not. They have increased dividends every year for decades-but the fact is that they believe they can continue to increase dividends on the basis of above-average dividend yields.

(speaking of dividend yield) when I first met John Neve 25 years ago, we compared the portfolio. He said, "son, your portfolio looks very good, but where is your dividend yield?" It seems to be below the market level. "

I said, "John, I know you like dividend yields above market levels, but you need to know that the value of an asset does not depend on how it distributes its earnings. Unless you believe that the market systematically misvalues the dividend yield or you can allocate these gains and achieve higher returns than the market. "

"Yes, I believe in both," he said. "(Miller giggles) I said," well, that's why you have a high dividend yield in your portfolio, which makes perfect sense. "so, even then, John was very rational.

Schering-Plough (Schering-Plough) is very good, but we just prefer Pfizer Inc Pharmaceutical.

Analyst:You mentioned Pfizer Inc, and you also talked about management and meetings with the management of the company. I have a lot of respect for Fred Fred Hassan, president of Schering-Plough. He hasn't handled some things very well lately, but I'm sure he can add a lot of value in the long run. What I am curious about is, what do you think of this company?

Miller:We do not own Schering-Plough, but we do respect this CEO and what he has done in the past. For us, this is a valuation judgment, not a management judgment. In any department or industry, what we usually want to do is. Historically, it is worthwhile to concentrate on investment-even if it is not so worthwhile now. But for the purpose of training analysts, we want them to bring together what they think is the best risk-to-return ratio.

Ideally, in any type, we only want to own one or two companies-not now but historically. So if we owned Pfizer Inc, we wouldn't usually own Schering-Plough and Merck or other companies.

According to Portfolio Report's estimates, the following stocks were the most bought by the Reg Mason value Trust (Legg Mason Value Trust) in the three months to June 30, 2006:

1.American International Group (AIG.US) $

2.$General Electric Co (GE.US) $

3.Time Warner Inc.

4.$Dell Technology (DELL.US) $

5.$Pfizer Inc (PFE.US) $

6.$HP (HPQ.US) $

7.Yahoo Japan (ADR) (YAHOY.US) $

8.Symantec Corp.

9.CA Inc.