In his July 2025 commentary It Often Rhymes, Bill Miller IV paints a compelling portrait of market distortions, pointing to overlooked opportunities in small-cap value stocks amid an all-time-high S&P 500.
“The S&P 500 came roaring back to hit a new all-time high over the course of 89 trading days,” Miller notes, “marking the fastest time to a new high after a drop of at least 15%.” Yet underneath the surface of this recovery, Miller sees a bifurcated market: a soaring large-cap growth segment versus a struggling small-cap value cohort.
“The Russell 2000 small-cap value index (RUJ) closed the quarter down 3.16% year-to-date, while the Russell 1000 large-cap growth index (RLG) is up 6.08% since the start of the year,” he writes, emphasizing a dynamic that has persisted since the global financial crisis.
While large-cap growth has outperformed for nearly two decades, Miller is skeptical this regime will last forever. “So-called ‘value’ securities often trade at low multiples not because they are mispriced, but because they are bad businesses,” he concedes. But he’s quick to add: “There are fair prices for great businesses and bad ones.”
The commentary draws historical parallels to the year 2000, when large-cap growth’s lofty multiples—like today’s trailing EV/EBITDA near 21x—left little premium over the 10-year Treasury yield.
“The last time large-cap growth provided no marginal trailing cash flow yield above the 10-year was in 2000,” Miller explains, “just prior to the bursting of the tech bubble,” which was followed by seven years of small-cap value dominance as “the US dollar lost 40% of its value.”
Miller also flags the dollar’s current weakness. “The US dollar began 2025 with six consecutive monthly declines, slashing its value by 10.7%,” he writes, calling it “the worst start to a year for the greenback since 1973.” This decline has boosted hard assets and emerging markets, and historically “benefitted… smaller capitalization stocks with lower multiples.”
Ultimately, Miller views the setup for small-cap value as asymmetric. “We believe the probabilities favor smaller capitalization stocks with low embedded expectations playing a little catch up to their higher-valued peers,” he says. With a backdrop of rising capital intensity among large-cap growth names and the possibility of “some animal spirits,” the case for small-cap value is building.
As Miller concludes, “Add in a cherrypicked dove to head the Fed… and you might have an explosive recipe for small-cap value outperformance.”
You can read the commentary here:
It Often Rhymes – Bill Miller IV
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