Source: Smart Investors

Bitcoin recently surged back to $68,000. Legendary investor Bill Miller (Bill Miller), who invests half of his personal assets in Bitcoin, is in the spotlight over and over again.

Miller really deserves the word “legend.” He, along with Peter Lynch and John Neff, are known as the “Three Musketeers of the American Mutual Fund.”

Miller joined Meissen as an analyst in 1981. Legg Mason Value Trust (Legg Mason Value Trust) was taken over in November 1990.

The winning streak began in the second year. In 15 consecutive years of managing Misheng Value, he has beaten the S&P 500 year by year, with an annualized return of around 16.44%. No one has broken this record so far.

Miller attributed this to, “Much of luck, and maybe some skill. I define skill as being able to survive in the market for a long time without self-destructing the Great Wall.”

In the early 1990s, Miller realized that some companies might be expensive today, but were actually “cheap” in the long run due to their excellent ability to grow.

Miller invested in 1999$Amazon (AMZN.US)$. After two years of investment, Amazon's stock price dropped from a peak of $107 to $5.50.

Miller has reflected on the way he bought it and switched from Amazon shares to convertible bonds (which also cost him tax losses), but he is always confident about the company's future.

“Most people try to maximize the number of times they're right,” Miller said. “The real question is how much money can you make when you're right.”

Investing in Amazon and other tech companies required Miller to abandon dogma, endure criticism from friends, be independent and open, and deviate from accepted wisdom, including beliefs in generally accepted accounting principles at the time.

His investment experience is the principle of coping with change: adapt to it, be misunderstood by it, buried by it, and come back again.

In the 2008 financial crisis, the funds managed by Miller retracted greatly, and his customers left. At that time, his Amazon stock, which he switched to personal holdings, has now risen 7,000 times!

Not only is Miller Amazon's third-largest individual shareholder (after Bezos and Mackenzie), he's invested a long time ago$Dell Technologies (DELL.US)$,$Apple (AAPL.US)$,$Netflix (NFLX.US)$Tech stocks... including Bitcoin.

According to his media interview, he first bought Bitcoin at a price of 200-300 US dollars, the average cost was about 500 US dollars, and now he has more than half of his personal holdings.

The mainstream market didn't pay particular attention to how Miller thought.

“I'm not a Bitcoin bully, I'm just an observer; it's a fascinating technical experiment.” Bill Miller said.

What many people don't know is that Bill Miller has been donating to the Santa Fe Institute for a long time, where he studied and understood the development context of complex science more than ten years ago.

Also labeled as a “value investor,” Bill Miller is indeed completely different from Buffett in this regard. Essentially, the value principles of the two are probably similar, but they are very different in terms of endowments, interests, and life goals.

Share a short story Miller told in a 2006 conversation. He said:

When I first entered the industry, I met Bill Rune (Warren Buffett's best friend, the person who trusted the client when the partnership disbanded).

Someone asked him, “If you could give me some advice about investing, what would you be?”

Rune told that man that if he had read Graham and Dodd's “Securities Analysis” and Graham's “Smart Investor” and then read all of Buffett's annual reports, if he actually understood what they said, he would know everything about investing.

I've been thinking about it for years and I totally agree with this proposal.

Two-time world poker champion Puggy Pearson (Puggy Pearson) has a classic comment, “Gambling is about three things: first, knowing the 60/40 bet; second, managing your money; and third, knowing yourself.”

Miller quoted this sentence to supplement his investment advice. He believes that these three points correspond to the key points when investing: you need to know the odds are good for you; how many positions you should get; understand your mentality and how you will respond to an unfavorable environment.

Miller sees the problem from a different perspective and is flexible in adapting to revaluation. We can find this in his annual letters, reviews, and interviews. Here are 38 sentences selected by smart investors to share with you:

I. How do you view the company

1. I don't think dividing the company into value and growth is more beneficial for us to think about the investment process. Companies that have grown are generally more valuable than those that have not.

2. However, if a company's earnings are lower than its cost of capital, then the faster it grows, the lower its value.

3. Companies with a return on capital higher than the cost of capital create value, and companies below the cost of capital destroy value. Companies that earn returns equal to the cost of capital grow in value at the same rate as capital.

4. What we need to do is find companies whose economic model supports a return on capital higher than the cost of capital.

5. Essentially, we always focus on future return on capital, not past return on capital. What are our best guesses about future return on capital, and how management will allocate capital in a dynamic competitive landscape.

6. Understanding a management team takes time. If you've owned a company for 3, 5, or 10 years, and have had a lot of extensive contact with management, you can learn a lot from the subtleties of how management answers questions and thinks about strategies.

7. I fully agree with Buffett that ignorance is not a virtue in our business. Therefore, any source of knowledge, any source of information is useful, as long as you understand its strengths and weaknesses.

II. Sources of excess income

8. Good companies are usually recognized by the market and properly valued, but sometimes discounts on intrinsic value also occur.

9. There are many reasons for these discounts. The most common are macroeconomic changes, company or industry problems, or immature business. In every case, the long-term economic benefits of a business are overshadowed by temporary factors or events.

These temporary factors can cause pricing errors, but they are also a source of excess returns.

10. Stock prices change much faster than the intrinsic value of an enterprise. This is because prices reflect recent history, current fundamentals, and reasonably foreseeable prospects (such as a 6-9 month outlook), all filtered through a mental and emotional prism.

11. We will work hard to buy companies whose stock prices are highly discounted compared to our assessed operating value. When the market is unanimously optimistic, the news is favorable, and investors are optimistic, there will be no low prices.

12. Our research work often focuses on markets where public opinion is least optimistic and inaccessible, and we usually sell stocks that people think have the greatest chance of earning in the near future.

13. Our method can be summed up by “the one with the lowest average cost wins”. For most investors, if a stock's share price trend is different from what was expected, such as a 15% drop, they are likely to sell.

But for us, for companies that have deep research and trust in their fundamentals, falling stock prices mean an opportunity for future returns to rise.

14. What we really need to do is take away from all the everyday noise and stuff that appears in newspapers or television, or from the hustle and bustle about what you should do now, and really think about how we can reap the benefits of more valuable businesses many years from now.

15. The most important thing is not performance, but process. A good process will eventually lead to good results in the long run, so you can't be bothered by what's happening in the short term.

16. The key question in the market has always been what is discounted. Excess profit is obtained when expected (discounted) is different from the actual situation.

17. In terms of investment portfolios, we adhere to the Taoist rule of inaction, that is, “doing nothing but doing nothing”, also known as creative inaction. Most of our portfolio adjustments have gone nowhere. The average turnover ratio is between 15% and 20%, which means holding for more than five years.

3. The value of growth should not be overlooked

18. Why do companies that create the most value almost never enter value investors' portfolios?

The answer is, value investors don't pay attention to these companies when they are “really cheap,” because it's hard to tell the difference between them and companies that have similar valuations but don't perform well.

19. Value investors are systematically ignoring companies that could have made them make a lot of money for a long time, because these companies seem expensive on the surface, but in reality they are not.

20. Technology is difficult, but it is not incomprehensible. If investors leave out the most important drivers of economic growth and progress because it takes effort to figure out technology, then when others reap the rewards, there's nothing to complain about.

21. It is true that some of the best technology companies are rarely attractive in terms of traditional valuation methods, but this explains more the weaknesses of these methods than the basic risk-reward relationships of these companies.

22. Technology is also cyclical, but many technology companies can maintain a return on capital above the cost of capital despite being cyclical.

23. In 1993, when we bought IBM near the bottom, we learned a few ways to analyze these companies. This is the first time we've tried this long-term investment strategy, which is to buy companies that are statistically inexpensive, but whose business model supports a high return on assets or capital and can generate large amounts of free cash flow.

24. Such companies can hold their portfolios for a longer period of time to bring better long-term returns to shareholders, rather than trading stocks based on our judgment of how these companies may perform in the coming year.

IV. Application of psychological factors in investment

25. Memory provides continuity and context for our daily activities, enabling us to recognize familiar situations, see their differences and differences, incorporate experiences into a wider range of behaviors, learn lessons from the past, etc.

26. However, investment memories often fail when they are most needed. We don't remember a similar situation happening recently, and we don't properly view current events. As a result, less than the best investment decisions were made based on this.

27. One of the biggest sources of mispricing is the tendency to place too much emphasis or excessive emphasis on the current situation (memory/psychology).

28. Understand your response to stress, especially when losing and winning money. Also, you have to know how most people react most of the time.

29. Most people like to buy stocks after they rise, and after stocks fall, they sell because of bad news pervading the market. To make more money, we need to sense changes in expectations rather than react quickly to them.

30. For most investors, selling expensive assets and buying cheap assets seems like a logical strategy — unless you actually try to do it.

In fact, most people don't act this way: because they feel pain when they buy assets that are falling in price.

31. Actual risk and perceived risk are two different things; this is why people are in trouble. When the price is low, they think the risk is high, and when the price is high, they think the risk is low. This is the mentality (misunderstanding) of most people.

32. Almost all value traps are people making simple linear inferences about past capital returns and past valuations. As a result, the current situation is not the same.

33. You really need to carefully understand and think: what information is not reflected in the stock price, what situations are not discounted, and what events will cause the market to have a different view of the company (stock price).

34. For investors, the more concerns people have, the better, because these concerns are reflected in the entire market (price).

5. Pay attention to the significance of probability and odds

35. People often can't tell the difference between probability and odds in investing. In fact, your probability of being right or wrong is completely different from how much money you make when you're right and how much you lose when you're wrong.

36. Although gambling has its dirty side, it is also one of the activities worth studying carefully. Because knowing what smart gambling is, you can invest more wisely.

37. The first thing to note is that there is no such thing as a professional roulette gambler, slot machine gambler, dice gambler, keno gambler, or lottery gambler, because you can't win continuously in these games (professional is useless). Casinos have a mathematical advantage. The longer you play, the more likely you are to lose.

38. The main difference between investing and gambling is that gambling is a zero-sum game where every winner has a loser.

Investing can be a win-win game where everyone (in theory) can win, that is, increase their wealth by providing their capital to others to collect fees — earn interest — or participate in economic growth through stocks.

Editor/jayden