UPDATE 3-U.S. large-cap stocks undervalued, Miller says

Wed Jul 21, 2010 8:19pm GMT

* Says large-cap stocks undervalued versus bonds

* Sees "once in a lifetime opportunity"

* Exxon Mobil yields more than 10-year Treasury (Adds closing stock prices)

BOSTON, July 21 (Reuters) - Legg Mason Inc (LM.N: Quote) fund manager Bill Miller said U.S. large-cap stocks like Exxon Mobil Corp (XOM.N: Quote) are dramatically undervalued.

Compared to the historically low yields on U.S. Treasury bonds, the largest U.S. equities are the cheapest they have been in almost 60 years, Miller wrote in his quarterly fund commentary released on Wednesday.

"U.S. large capitalization stocks represent a once in a lifetime opportunity in my opinion to buy the best quality companies in the world at bargain prices," Miller wrote. "The last time they were this cheap relative to bonds was 1951. I was 1 year old then, but did not have then sufficient sentience or capital to invest."

Miller, who runs the $4 billion Legg Mason Value Trust fund, offered Exxon as an example of a company that was undervalued.

The oil giant pays a dividend yield higher than the yield on 10-year Treasuries, has increased its dividend by 9 percent a year over the past five years and has bought back between 300 million and 400 million of its shares per year, Miller wrote.

"Yet what do people want: Treasuries. What do they not want: Exxon Mobil and most other large capitalization U.S. stocks with similar characteristics," Miller wrote.   Continued...

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