Bill Miller's record-setting fund beat the market for 15 straight years. He explains why WeWork's recent debacle could help revive an investing technique previously left for dead.

• Legendary fund manager Bill Miller says he thinks the seeds of a comeback in value investing were sown by the WeWork fiasco and easier monetary policy around the world.
• Miller, who owns a record 15-year streak of beating the stock market in the 1990s and 2000s, says his Miller Opportunity Trust surged in the second half of 2019, which reflects the potential of his approach.
• He also emphasized that value investing doesn't have to be governed by a strict approach to traditional financial metrics.
• Visit Business Insider's homepage for more stories.

If traditional value investing no longer works, no one told Bill Miller.

Miller is known for investing in companies with strong fundamentals that he thinks are underappreciated by the rest of the market. That method helped him beat the S&P 500 for 15 years in a row from 1991 to 2005 - a record that still stands. It's an approach that's still working in today's growth-at-any-cost market.

And despite cries of value-investing underperformance throughout the 11-year equity bull market, the Miller Opportunity Trust has beaten 99% of its peers over the past three years. It's also outperformed the S&P 500 over the same period.

Given those results, Miller thinks his focus on those low valuations, strong free cash flows, and earnings above the cost of capital will continue to pay off. He also thinks investors are coming around to his way of thinking, and not just because his own track record is persuasive.

"In mid-August of 2019 we were behind the S&P 500 by over 900 basis points on a year-to-date basis," Miller told Business Insider in an exclusive interview. "We ended up ahead by 250 basis points [at the end of the year]. So we made up 1100, 1200 basis points ahead in a quarter and a month."

One reason is that investors have seen the downside of focusing only on growth that's not tethered to anything more concrete. The WeWork blowup and Uber's difficult market debut showed that when investors lose confidence in a growth story, the results can get ugly in a hurry.

"That's changed the market's perception of money-losing, fast-growing companies and the ability of companies that might dominate things and be doing things differently, but can't make any money and constantly need to come to the market for stock or to borrow money," he said. "There's a greater focus on current profitability now."

A looming growth-stock backlash

At the same time, he argues that a different trend means investors are gradually letting go of their impulse to pay huge premiums for growth companies. That's because falling interest rates will support sustained economic growth, which makes those few big growers seem less scarce.

"If economic growth picks up ... that will change the relative valuation of companies whose returns on capital are improved," he said. "It reduces the valuation of the super high growers, which were scarce resources when most things weren't growing, but were less scarce as growth rates picked up."

That situation could last for a long time, since interest rates are once again at low levels. But even though Miller thinks investors are ready for something of a comeback, he disputes the premise that the approach ever stopped working.

"The 10 years that value did poorly, I would say that that simple-minded value did poorly, namely just looking at basic accounting stuff," he said. "If you're actually valuing businesses, you did quite well."

In other words, people were too rigid and basic in using the approach. Miller urges investors to keep in mind that traditional financial measurements might have their use, but they're supposed to complement an investment approach instead of dictating it.

"There's a reason that Generally Accepted Accounting Principles are called Generally Accepted Accounting Principles and they're not called divinely inspired accounting principles," he said. "They're just a shorthand to try and get underlying sense of the underlying economic value that's being created. In many cases, it's a very bad shorthand."

For example, Miller was an early Amazon enthusiast when the company was losing money and its financial performance was, at best, inconsistent. But he was handsomely rewarded for it, and Amazon is still one of the largest positions in his Opportunity Fund.

Time will tell if Miller's latest views become as popular.