Investor Bill Miller came back with a bang in 2019, riding the stock market’s relentless rally to record highs. He also thinks there may be more gains in 2020.
Miller’s firm, Miller Value Partners, posted a return of 119.5% last year net of fees, he told investors in a Jan. 15 letter. Those gains more than made up for the firm’s 33.8% loss in 2018.
Those returns also blew the broader market’s gains out of the water. The S&P 500 rose 28.8% in 2019. Still, that was the index’s best annual performance since 2013.
“Few, if any, predicted a strong stock market given how bad the fourth quarter  returns were. The result was the best stock market in years,” Miller wrote. Stocks sold off sharply in the fourth quarter of 2018, battered by fears of a global economic slowdown and U.S.-China trade tensions.
Wall Street’s strong performance, including Miller Value Partners,′ was driven in large part by easier monetary policy from the Federal Reserve along with easing tensions between China and the U.S.
Miller also noted he kept his holdings intact throughout the final three months of 2019, which led to a fourth-quarter return of roughly 60%.
“In the 4th quarter, we did our favorite thing to do in markets: nothing. No new names and no elimination of holdings from the portfolio. This doesn’t happen as often as it probably should,” Miller wrote.
Miller, who beat the market for 15 straight years while working at Legg Mason, added the market can yield more gains this year. To be sure, it may not be as straightforward as 2019.
“Stocks will not move in a straight line higher even if the bull market continues in 2020, as I believe it will,” said Miller. “Setbacks and corrections should be expected, but unless something causes the economy to tip into recession and earnings and cash flows to decline, which I do not expect even if the geopolitical situation gets grimmer, then the path of least resistance for stocks remains as has been for a decade: higher.”