market folly

Value investor Bill Miller of LMM Investments appeared on CNBC today and thinks we're in a secular bull market that began in March 2009.

"Bonds are unattractive in my view.  I believe we hit a double bottom in bonds in the summertime... 35 year bull market in bonds is over."

"As long as stocks yield more than bonds, stocks are attractive."

Miller is fully invested and says, "Cash earns zero, why do I want something that earns zero?"

He likes One Main Financial (OMF), bought in the spring, still thinks it's 'crazy cheap.'  Thinks smaller financials are attractive, mentioned MGIC (MTG) and Radian (RDN), mortgage insurers. 

Miller also likes big financials as well: Bank of America (BAC), Citigroup (C), JPMorgan (JPM).  Value investor Rich Pzena also likes financials, as he mentioned in his interview last week.

Bill Miller has owned Amazon (AMZN) since the IPO and still owns it today.  He says that was one of the best decisions he's ever made, and one of the worst has been selling any shares of it.  It's his largest position and says people have misunderstood AMZN's valuation from the beginning.  "Amazon's total addressable market is just so much bigger than any other company on earth."

He also talked about Twitter (TWTR), saying he sold half of his call options when it was in the $20s, and thinks it's a unique asset as a 'network of interests.'  He thinks they need a fulltime CEO and suggested they could perhaps switch to a paid monthly platform.  "We own Twitter because of the optionality."  He think it has a floor of $15-16.

Miller also owns various homebuilders such as Lennar (LEN) and TriPointe (TPH).  Feels builders will grow double-digits for the next few years.

On airlines, Miller still owns them and says Delta (DAL) is trading at a 15% free cash flow yield and will generate $5 billion in free cash and return 75% of that to shareholders.  He likes United (UAL) with more upside as the margins are depressed and they've got new management there.

Miller also commented on former hedge fund hotel Valeant Pharmaceuticals (VRX):  "It's probably the most toxic stock in the overall market.  It's blown a hole in Ackman's portfolio, it cost Bob Goldfarb, one of the best investors in our generation his job.  Our cost is from $20-35, we just bought more last week." 

He says they have 2 issues: the legacy issue of transitioning new leadership and then the debt load.  He thinks it doubles in 3 years as the company has a lot of cashflow and will look to sell non-core assets.

He also talked about Netflix (NFLX), noting it's an incredible company and he's owned it twice before, but thinks it's expensive now.  Also thinks Tesla (TSLA) is expensive and most energy plays are as well, especially the integrated players.

For more from prominent investors, check out David Tepper's recent interview, as well as Keith Meister's thesis on YUM China.