Bill Miller, chairman of Legg Mason Capital Investment, was featured in an interview on the "Bottom Line" program on Bloomberg TV, and he discussed a couple of sectors that he believes have an upside coming to them in the short term, while one of them is actually on the early stage of a longer-term upswing.
Would you believe that housing is on the long uptick? Miller certainly does.
"The earning power of these companies is a lot greater than it used to be," Miller said about the housing sector. "There is much less competition right now, there are much different margin strategies because of the way they are managing the land inventory. All-in-all, it looks to be a very long cycle and we're in the first year of it. It's going to be hard for people not to make money in housing over the next several years."
As of June 30, Miller's holdings in the fund he currently manages includes shares in Lennar Corporation (NYSE:LEN), in which he had a $24 million stake; but he also has holdings in PulteGroup Inc (NYSE:PHM) and KB Home (NYSE:KBH).
Another sector Miller commented upon in the interview was in commercial airlines. One reason for his bullish attitude is because of consolidation of airlines, plus free cash flow. "For four of the last five years, the airline industry has recorded positive cash flow. Only in 2009, post the collapse, did they post a negative cash flow." However, he added that if the airlines do not maintain capacity discipline, the he would become more cautious. His top holding in the industry is United Continental Holdings Inc (NYSE:UAL), with a $138 million holding as of the end of June.