I sympathize with Bill Miller; no one likes to have a losing streak. That said, by my calculations, he is now behind the S&P 500 over the last ten years.

I want to offer a simple explanation as to why Bill Miller has done so poorly recently. First, he has bought growth companies — companies where the valuation is critically dependent on future earnings growth. Think of Amazon (a success) or Yahoo (a failure). Second, he avoided cyclical companies that benefit from global economic growth, that is, energy and basic materials.

Bill Miller did well in the era where he used simpler valuation metrics, before he moved onto metrics that demanded more from future growth of earnings. Since that time, he has underperformed, and deservedly so. He has neglected the core idea of value investing, which is the margin of safety. By buying companies that will get crushed if growth targets are not met, he has invited his own troubles.

And, for someone who prizes deep thinking, I’m afraid he missed the forest for the trees. (Tsst… MM is a bright guy, I like reading him, but what does he really add?) Better to spend a little time looking at the world, and adjust the investing accordingly, than to insist that a bunch of US-centric growth companies will outperform. Cyclical growth is real growth in this environment.

I hope Bill Miller turns it around because many friends of mine are part of the Baltimore money management community. As Legg Mason shrinks, so do opportunities here. But to turn it around, it means a return to down and dirty value investing, and an eye toward analyzing what sectors will do best from a global context.