After plunging almost 19% from its late February peak to the April 8 closing trough, the stock market staged a quick rebound in the second quarter of 2025. The S&P 500 came roaring back to hit a new all-time high over the course of 89 trading days, marking the fastest time to a new high after a drop of at least 15%. The market making a new all-time high should not be news, especially with the US money supply (M2) hitting all-time highs, but two developments were especially noteworthy – namely, the abysmal performance of the United States dollar, along with the relative performance of large cap growth names hitting a new all-time versus their small-cap value-oriented brethren, a dynamic we do not expect to last into perpetuity.
The US dollar began 2025 with six consecutive monthly declines, slashing its value by 10.7%, indicating the worst start to a year for the greenback since 1973 shortly after floating at the end of the Bretton Woods era, a roughly three-decade period of the US dollar being pegged to gold. Concerns around inflation caused by deficits, money printing and economic isolationism have helped gold double off its multi-year low in the fall of 2022 (Bitcoin is up nearly 6x over the same period). The weak dollar has helped the performance of both hard assets as well as emerging markets.
One group that has historically benefitted from such a dynamic is smaller capitalization stocks with lower multiples. This has not happened in 2025, as 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. The stark performance discrepancy has persisted for the better part of nearly two decades since the global financial crisis, and not undeservedly. So-called “value” securities often trade at low multiples not because they are mispriced, but because they are bad businesses; indeed, the best-performing assets of all time rarely looked like a value to the near-sighted.
However, there are fair prices for great businesses and bad ones. The aforementioned large-cap growth index’s trailing EV/EBITDA multiple is approaching 21x, meaning that the pre-tax cash flow yield at these prices provides little, if any, premium over the 10-year government bond, whose nominal annualized return is guaranteed to those who hold until maturity. The last time large-cap growth provided no marginal trailing cash flow yield above the 10-year was in 2000, just prior to the bursting of the tech bubble, which coincided with the start of a seven-year period1 over which small-cap value trounced large-cap growth and the market as a whole, while the US dollar lost 40% of its value.
Of course, stretched absolute and relative multiples in no way guarantee that smaller-capitalization or lower-multiple stocks will outperform. High multiples can get higher, low multiples can go lower, and fundamental surprises will occur. But we believe the probabilities favor smaller capitalization stocks with low embedded expectations playing a little catch up to their higher-valued peers with lofty investor expectations. There are limits to the economic contributions from companies that need little labor to grow, and the required surprises to justify multiple growth beyond these levels has not occurred in the past. Consider that large-cap growth is approaching its prior peak valuation as the group’s capital intensity surges; meanwhile, small-cap value trading at reasonable multiples would benefit meaningfully from positive economic growth surprises. Add in a cherrypicked dove to head the Fed along with some animal spirits, and you might have an explosive recipe for small-cap value outperformance.
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Miller Income Fund
The Miller Income Fund (LMCLX) gained 6.00% in the second quarter, outperforming the ICE BofA High Yield Index’s 3.59% total return. (View current performance) As of 6/30/25, the portfolio was 86% in equities and 14% in fixed income. The Miller Income Fund’s dividend yield for the equities stood at 5.34% as of quarter-end, or roughly 400 basis points (bps) higher than the S&P 500’s quarter-end indicated dividend yield, which recently fell to its lowest level since 2000 (1.25%). The portfolio’s current yield, which takes into account all holdings, was 6.20% as of 6/30/25.2
We exited AT&T (T) during the quarter, as the telecom giant reached our fair value estimate with valuation multiples stretched to the higher end of their historical ranges.
The fund added two new positions during the quarter. Venture Global’s 9% unsecured perpetual bonds yield nearly 10%, as the liquefied natural gas (LNG) exporter rapidly scales volumes and profits, which should eventually allow for organic de-leveraging from a moderately high 5.5x net leverage ratio today (based on FY25 Adjusted EBITDA estimates). We also initiated a position in Strategy 10% preferred perpetual stock, which yielded 11% as of quarter-end, a compelling return for significant asset coverage since Strategy’s massive Bitcoin stockpile of 597K bitcoins worth ~$64B3 and accretive share issuance provide ample coverage for only $11.4B worth of debt and preferred securities, while also enabling further bitcoin accumulation.
MVPA
Miller Value Partners Appreciation Fund (MVPA) gained 10.27% (market price) in the second quarter, underperforming the S&P 500’s 10.94% return, as the fund’s smaller-capitalization securities represented a drag on performance. (View current performance)
The fund initiated positions in two new stocks during the quarter. Alphabet (GOOGL), the fund’s first holding of a Magnificent 7 company, trades at a near 10-year low forward P/E multiple due to regulatory concerns and AI-powered search engine competition. We focus on the company’s net cash balance sheet, robust and expanding profitability, and multiple growth levers in addition to its dominant search, smartphone OS and advertising businesses (e.g. Waymo, Cloud, etc.). Venture Global (VG) was one of the fund’s top performers during the quarter, as the LNG exporter continues to scale operations and capitalize on strong customer demand, yet the stock trades at an undemanding EV/EBITDA (FY25 estimates) multiple of <11x, even after a string of significant insider buys in March. The fund exited Gamestop (GME) during the quarter, as questions arose regarding management’s capital allocation priorities, including future Bitcoin accumulation plans, as the video game retailer grapples with declining revenue and a shrinking store base.
MVPL
Miller Value Partners Leverage Fund (MVPL) returned 19.66% (market price) during the quarter, outperforming the S&P 500’s 10.94% gain. (View current performance)
After entering the second quarter without leverage, our signal turned bullish in the second week of May, and we remained in a leveraged position for the rest of the quarter.