* 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)
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.
Shares of Exxon Mobil closed down 78 cents, or 1.32 percent, to $58.17 on Wednesday on the New York Stock Exchange. The shares have lost 15 percent this year, trailing the 5 percent decline in the Standard & Poor’s 500 Index.
Though Exxon was not among the top 25 holdings of Miller’s fund as of March 31, Miller said his fund owned the stock as of June 30 without specifying how many shares it had purchased.
Miller’s performance over the past three years has suffered after he set a fund industry record by outperforming the S&P 500 for 15 consecutive years in the period 1991-2005. The Value Trust fund has lost 11.69 percent so far this year through the end of June, trailing the S&P 500 index by almost 7 percentage points. (Reporting by Aaron Pressman; editing by John Wallace, Robert MacMillan and Bernard Orr)