Bill Miller's Housing Spree Pays Off

Bill Miller, who beat the Standard & Poor’s 500-stock index at Legg Mason’s Value Trust for 15 years through 2005 before falling into a deep slump, is seeking redemption as a housing bull. Miller’s Legg Mason Capital Management Opportunity Trust has bet about a third of its holdings on a property rebound through homebuilders, mortgage real estate investment trusts, and loan insurers. The move has propelled the $945 million fund to a return of 30 percent this year through Oct. 15, surpassing 99 percent of its peers, according to data compiled by Bloomberg. “Housing fundamentals are likely to be positive for years,” says Miller, 62. “The stocks have run, but in our judgment are not even close to reflecting that long cycle.”

Miller’s winners this year include homebuilder PulteGroup, which had more than doubled as of Oct. 16 after dropping 16 percent in 2011; Ellington Financial, a mortgage bond investor that’s up 30 percent following a 22 percent decline; and companies tied to a housing rebound, such as Bank of America, the nation’s No. 4 mortgage lender in the second quarter, which gained 70 percent, to $9.44, after plunging 58 percent last year.