A Look at Who's Chasing Bill Miller's Streak

I know, I know. All things considered, it really doesn't matter whether Bill Miller extends his S&P 500-beating streak to a record 14 years. After all, the true judge of a good investor is the ability to deliver value over the long haul, regardless of what may happen in a year, or two, or even three. And as my colleague Chris Traulsen  points out, there have been more than 30 12-month rolling periods during Miller's streak when he has underperformed the index.

Nevertheless, you can't help but cheer Miller on and hope that his streak stays alive. After all, he embodies what a good active manager ought to be: an independent thinker and one who invests with the long haul in mind. You won't see Miller making drastic, short-term changes to the fund's portfolio just to keep up with the index.

Perhaps that's what makes 2004's run so entertaining. Entering the year's final quarter, the fund was more than four percentage points behind the index. And it closed out November with a 1.7 percentage point deficit. But a recent jump in shares of  Amazon (AMZN), among others, has nicely boosted the fund. As I write this, the fund has now edged ahead of the index, however precariously, and the lower-cost institutional shares now seem certain to beat it. In fact, the ultimate irony here would be if the lower expense institutional shares beat the index, but the higher expense retail shares--on which the fund's streak rests--do not.

In any case, to illustrate just how hard it is to beat the S&P 500 year in and year out, I looked to see which large-cap funds would own the longest active winning streaks if  Legg Mason Value Trust (LMVTX) were to falter this year. The answer, and the short duration of the streaks, may surprise you. Only two other large-cap blend funds,  Quaker Strategic Growth  and Purisima Total Return  have beaten the S&P 500 annually since 1998, and the latter's streak is likely to come to an end this year. The list expands to 15 large-cap blend funds if we look at funds that have beaten the index every year since 1999 and includes offerings such as  Fidelity Export and Multinational , Cambiar Opportunity (CAMOX), and  Vanguard Growth & Income (VQNPX). Meanwhile, in the large-growth and large-value categories, the streaks belong to a pair of American Funds: Growth-leaning  AMCAP (AMCPX) has beaten the index annually since 1998, and value-leaning  Fundamental Investors (ANCFX) has done so since 1999. (AMCAP's streak, however, is likely to end this year.)

This type of analysis is a lot less relevant and interesting when looking at mid-cap and small-cap funds. After all, they own much smaller stocks than the S&P 500, so a comparison isn't entirely valid. When small-caps lead the market, these funds should beat the index, and vice-versa. Nonetheless, I looked to see how they've stacked up against the bogy; the results weren't all that different from those of the large-cap funds. In fact, only one mid-blend fund has beaten the S&P 500 annually since 1997, and one mid-growth fund has done so since 1998. And no small-cap funds have a streak that dates back to 1998. Predictably, once we started getting in to a more favorable environment for small-caps in 1999, more than 50 small-cap funds began an ongoing positive run against the large-cap heavy S&P 500.