A Sneak Peek at the Holdings of Bill Miller's New Fund

Top item in the kid-in-the-candy-store file: What does the Fund Manager of the Decade (actually, the only manager to beat the S&P 500 index each year for the past nine) do with a clean slate? What are the stocks he wants in the new millennium's market mayhem with millions pouring into a new fund?

What's Legg Mason's Bill Miller buying for his newest, just-launched (LMOPX Quote)Opportunity Trust?

Turns out, in several cases, that the answer is very different from the one to this question: What's Bill Miller buying for his $12.5 billion, nearly two-decade-old (LMVTX Quote)Legg Mason Value Trust? There, he has existing, often long-term, holdings and must deploy fresh cash with an eye to what it means to a huge portfolio. Not only are there tax and turnover considerations -- asset allocation, too -- but, as a large value fund, he's also limited by asset size and a stated philosophy.

Granted, Miller's definition of value is far from traditional, but his new, much-smaller (about $360 million) Opportunity Trust gives him even more latitude. The company calls it a "flexible strategy" fund -- with no limitations by "investment style, industry sector, location, size, market capitalization." It can short stocks, too.

A list of stocks presented earlier this month at a Legg Mason gathering of top brokers offers some clues to what he is doing with that minimal mandate and the clean slate that Opportunity Trust offers. Although Legg Mason won't comment, a good source says Miller indicated that he bought the following for the new fund, launched at the end of last year:

Legg Mason Opportunity Trust Holdings
Amazon.com(AMZN Quote)
AmSouth Bancorp(ASO Quote)
Gateway (GTW Quote)
Mandalay Resort Group(MBG Quote)
Republic Services (RSG Quote)
Toys R Us(TOY Quote)
Time Warner(TWX Quote)
Washington Mutual(WM Quote)
Finova(FNV Quote)
Acxiom(ACXM Quote)
Ames Department Stores(AMES Quote)
China Telecom (Hong Kong) (CHL Quote)
CIT Group(CIT Quote)
Globalstar Telecom Conv. Pfd
Tupperware(TUP Quote)
Unum Provident(UNM Quote)
U.S. Foodservice(UFS Quote)
Viad(VVI Quote)
Westpoint Stevens(WXS Quote)
Source: Company reports

A few thoughts about this collection:

The man who built his reputation on America Online (AOL Quote) (he bought it years ago and its high-octane returns through the '90s are in large part what helped Legg Mason Value vault to the top of the charts) is choosing instead to dance with the Internet powerhouse's new partner: Time-Warner (TWX Quote). No AOL on the list. Does that mean he's actually unloading the stock in his other portfolios, as Wall Street seems to be betting lately that the proposed merger is actually a detriment to AOL?

Perhaps AOL isn't the only one without a "buy" sign. According to Legg Mason's Web site, Legg Mason Value's top-five holdings as of Dec. 31 were AOL, Gateway (GTW Quote), Dell (DELL Quote), Nextel (NXTL Quote) and Nokia (NOK Quote). Gateway is the only one on the Opportunity Trust list.

But Miller seems to remain a big backer of beleaguered e-commerce giant Amazon. He started buying the e-tailer last fall for Legg Mason Value, but that was before the company's holiday season and before it announced some staff layoffs earlier this year. And seems he's standing behind another troubled retailer: Toys R Us (TOY Quote).

On to the financial sector, which usually ranks right behind tech in terms of industry weightings in Miller's book. Here, no sign of the manager's usual suspects, Citigroup (C Quote) and Chase Manhattan (CMB Quote). Instead, we find commercial and consumer financing companies CIT Group (CIT Quote), Finova (FNV Quote) and insurer Unum Provident (UNM Quote). The only financial holding in common with Legg Mason Value: Washington Mutual (WM Quote). (But again, remember that the portfolio list available for Legg Mason may be a bit dated, as most of those documents are.)

So, there is a sneak peek into recent stock picking from one of the best in the business. (Legg Mason says the company won't release Opportunity Trust's holdings until after March 30.) Although, granted, you might wonder how he got that reputation when you look only at very short-term numbers. Legg Mason Value has had a miserable start of the year -- bumping along the bottom of its category, 10 points in the red, well behind the S&P 500. Big holdings in Dell and AOL can't have helped the bottom line recently. And in fact, for the past 12 months, the fund has returned just 9%, barely among the top quarter of its rivals.

But Miller's unique value philosophy has weathered tough times before. Legg Mason Value is at the other end of the charts long term, ranking first for the three-, five- and 10-year periods.

And although some of you may not consider Wall Street a candy store these days, this is the first chance we've had in more than 15 years (when his last fund launched) to see what this top-performing manager might choose on an unlimited run through it.