Bill Miller wants revenge and I believe he's going to get it.

It's an incredible feat to beat the S&P 500 for 14 straight years in a row (averaging an incredible 16.6% per year), particularly during the greatest bull market ever. But this year Miller missed the market.

However, I believe we're going to see a strong comeback in Bill Miller's top holdings in 2007.

Alas, for now, you're only as good as your last year and folks are making fun of the fact that Miller, by returning 6.4% last year, even lagged top Playboy Playmate, Deanna Brooks, who returned 43% in the markets trading contest.

However, Miller is more bullish than ever. He recently stated in an interview that he's so bullish for 2007 that this is the first year since 2002 that he is starting to use leverage to buy stocks. Here's what I believe are the best stocks he's got going right now.

First off, we have Yahoo! ( YHOO). It has already made a decent run in the first few days of the year and I wouldn't be surprised to see this back in the upper 40s.

With its Panama product, we're going to see Yahoo!, for the first time, compete head to head with Google in the micro-advertising space. Finally, people will be able to bid for keywords across Yahoo!'s networks. Advertisers have been dying for someone to come along to compete with Google. The market had completely written off this aspect of the business to zero.

Second, Yahoo!'s acquisitions of delicious and flickr will ultimately rival that of YouTube and MySpace as the best acquisitions ever.

And third, the recent management shakeup puts Sue Decker in line to be CEO and I believe she's a quality exec, and many other companies do as well (for instance, she's on the board at Intel). I'm looking for Yahoo! at $35 or higher in the coming year. (Here's Yahoo!'s Stockpickr page.)

According to Stockpickr, Street Insight writer Grange Johnson, through his LaGrange Capital, also owns Yahoo!.

Next, Miller has a stake in VeriSign ( VRSN). VeriSign underperformed the market last year, going from 22 to 24. Part of the reason is that the market really hated the Jamba! Mobile business, which was showing some lagging numbers.

Well, fine. Verisign ended up selling the business for a profit. Meanwhile, it confirmed its monopoly with ICANN in the domain name business (when you register a dot-com name, you pay VeriSign $6 no matter who you are registering with), and it sold its payments business to eBay, and in doing so, made eBay its top customer for its security business. Meanwhile, it has a great balance sheet with $500 million net cash, it is growing, and it trades for barely 13 times cash flows. I believe VRSN hits $30.

Two other funds that agree with Miller on VRSN are notorious value investor Private Capital Management, who has probably been invested in more companies sold to Buffett than anyone else. His holdings are always worth a look. And Ivory Asset Management, another value fund that was recently profiled in Barron's. An interesting quote from Ivory is that it doesn't like piggybacking other hedge funds, but that doesn't stop us from taking a look at what he's got going on. Interestingly, Ivory also owns Yahoo!.

And finally, Miller owns Diller's Interactive Corp., ( IACI). It owns the fourth-largest search engine, Ask.com, as well as top dating site, Match.com, lender Lending Tree, Ticketmaster, CitySearch and even CollegeHumor.com. IACI is like the GE of the Internet, owning companies that are in the top four of almost every category on the Internet.

The company has almost $1 billion in net cash, has nice growth (about 25% earnings growth is anticipated in 2007 by analysts) and yet only trades for 10 times cash flows. I believe IACI can flirt with 50.

Another great investor in IACI is Wally Weitz, often called the "other Oracle of Omaha" because of his location and his returns.

These are just three of many of Miller's positions that I believe are in deep-value territory for 2007. I'm a strong believer in the ability of great investors to bounce back strong and I believe 2007 will be Miller's year.

To be informed when Miller changes his positions, you can bookmark his portfolio on Stockpickr by rating it with four stars. Then, whenever we update the portfolio, you will be notified via email. Also, if you agree or disagree with any of these positions that Miller holds, comment on the message board for his portfolio.

Another interesting thing to note: Now that he no longer holds his crown, who has the best shot at succeeding him in besting the S&P 500? The current crownholders have a tie at seven years running: Goldman Sachs Growth Strategy Fund, Manning & Napier Pro-Blend fund and the Schneider Smallcap Value Fund.

Check out those funds to see not only their holdings but also the overlap those holdings have with other funds, and to see what funds and positions are highly correlated to these funds.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and Trade Like Warren Buffett. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback; click here to send him an email.

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