Bill Miller

Bill Miller is chairman of Legg Mason Capital Management. (Kenneth K. Lam, Baltimore Sun / July 30, 2013)

During the depth of the 2008 financial crisis when Bill Miller's funds were in free fall, a colleague advised him to get a dog.

"I needed to change my luck," said the Legg Mason money manager, famous for beating the market 15 years in a row. "I reasoned that to have a bull market, you need a 'bull' dog of some sort."

Miller, 63, settled on an English bulldog he named after boxer Jake "Raging Bull" LaMotta. "The bulldog was the reason the market recovered," Miller said during a recent interview at Legg's headquarters in Baltimore's Harbor East.

It's not just the market that's up these days. Miller's Legg Mason Opportunity Trust, which he has managed since its inception in 1999, also is on top. The mid-cap value fund, with about $1.5 billion in assets, rose nearly 40 percent last year, counting reinvested dividends, and so far this year has gained 41.6 percent — each time at least doubling the performance of the market.

For three quarters in a row, Opportunity Trust was the top-ranked U.S. diversified stock fund with more than $50 million in assets, according to a Wall Street Journal survey.

And after about five years when more money has moved out of Opportunity Trust than in, the trend started to reverse in late June, Miller said. Net inflows for July were nearly $68 million.

Analysts, though, warn that the fund isn't for the fainthearted or meant to be a core holding in an investor's portfolio. Opportunity Trust has wide performance swings, they say, and its long-term investors have yet to recover from losses in 2008.

The fund generally invests in companies whose shares are selling below what Miller believes is their true value. It's a strategy similar to the one Miller employed at the better-known Value Trust fund, which he managed for decades before relinquishing the reins last year.

Bridget Hughes, associate director of fund research at Morningstar, said the Opportunity Trust "is back" — "kind of what you would expect from an aggressive, contrarian style in a bull market."

As for Miller himself, she said: "It's tough to say whether he's back."

Even today, Miller's market-beating record with the Value Trust stands. The closest other fund managers have gotten was 11 consecutive years of outperforming the market, according to Morningstar.

At its peak, the Value Trust's assets ballooned to more than $20 billion. Around that time, Miller bought a 235-foot yacht for his then-wife, although he rarely used it.

"I'm probably the only person in history that bought a boat even remotely that size never having been on one," he said.

Only later he heard that yachts make for bad karma. "That's when our performance started down," Miller said.

His winning streak ended in 2006, and things went quickly from bad to worse with both funds. He made big bets in financial and housing stocks, sectors that bore the brunt of the 2008 crisis.For instance, he continued to plow money into investment firm Bear Stearns right before its collapse and into mortgage financier Freddie Mac prior to a government takeover.

"In 2008, I made a lot of mistakes," he said. "The world was getting worse, and the decisions that we made typically were decisions that turned out to be bad."

Miller said that at the time, he hadn't realized 2006 was the beginning of the end of a 60-year credit cycle in which debt — government, personal and private sector — drove economic growth. The end came in 2008 with the collapse of the housing market, he said.

Value Trust lost 55 percent that year, while Opportunity Trust plunged nearly 66 percent, compared with a 37 percent drop for the market.

Investors pulled billions out of both funds. Speculation grew about whether Legg would keep its one-time star manager.

"To Legg Mason's credit, they didn't fire him," said Hughes, adding that Miller became "very contrite, humbled" after 2008.