Can Bill Miller shed value box?

When mutual fund manager Bill Miller returned from vacation last Monday, he found $130 million sitting on his doorstep. The mandate for handling the chunk of cash? Invest it, virtually any way he sees fit.

But will Mr. Miller, best known for managing Baltimore-based Legg Mason’s Value Trust, really be able to step outside the value box?

That’s been his forte for years — he’s beaten the S&P 500 for a decade straight — but as manager of Legg Mason’s new Opportunity Trust fund he’ll have much more latitude to invest. So, just how far will he stray from his tried-and-true approach?

“Of course he’ll do a fine job with the fund,” says Jeff Merriman, a principal of Merriman Capital Management in Seattle. “The real question is what is he doing that’s different from what he’s been doing with the Value Trust?”

Mr. Miller was unavailable for comment, but Tal Daley, a senior vice president and director of Legg Mason Funds Marketing, says that the Opportunity Trust’s underlying philosophy will still be value investing. Mr. Miller specializes in buying undervalued stocks before the rest of the market catches on.

“It is value investing,” Mr. Daley acknowledges. “But the prospectus gives him wiggle room for something that doesn’t fit into his value parameters. Our feeling is that we’re still going to be value players, but you might see something in there that he wouldn’t put in the Value Trust.”

Mr. Miller, who was named a 1998 fund manager of the year by Chicago fund-tracker Morningstar Inc., has been criticized for including non-traditional value stocks like America Online in the Value Trust.

Yet challenging the definition of value investing has proved to be a winner for his fund investors, who certainly aren’t complaining.

“One of the things that’s so intriguing about Miller running this fund is that his perception of what’s a value in today’s market is different from some fund managers,” says Joe Spinelli, a financial consultant with Atlantic Financial Inc., a full-service online brokerage and asset manager in Wellesley, Mass.

Despite Mr. Miller’s stretched definition of value investing, many stocks have been untouchable by the Value Trust or the other fund he manages, Legg Mason’s Special Investment Trust. Both have focused goals and investment styles, says Jennifer W. Murphy, chief operating officer of Legg Mason Fund Adviser.

“If we found interesting IPOs or small caps, we weren’t able to invest in them,” says Ms. Murphy. “Those are the kinds of opportunities our research team is already uncovering. This fund has great flexibility.”

The prospectus allows Mr. Miller to select stocks without strict adherence to investment style, issuer’s location, size, market capitalization or industry sector, although most of the assets will be U.S. securities.

Exactly what stocks will merit a second glance will remain a mystery until the fund files its first quarterly statement with the Securities and Exchange Commission.

However, Mr. Daley says financial services and technology stocks are likely options.

“I’d also suggest that there are some good basic industries that are awfully cheap,” he adds. “Also the Waste Managements of the world — the ugly ducklings.”

According to Mr. Daley, Mr. Miller’s hope for the Opportunity Trust is to simply have a “reasonably good-sized fund.”

“We’ve already met that goal,” Mr. Daley said. “We’re already at $175 million [as of Jan. 5]. But would he want $350 million to $500 million by the end of the year? Absolutely. That would give him maximum flexibility.”

Fund watchers say the Opportunity Trust will probably be popular among individual investors.

“The public might love it,” says Mark Podolsky, an investment adviser with Financial Solutions Associates in Dedham, Mass. “They just want to buy anything from anyone that’s going up.”

“The only place he might have difficulty is with asset allocators, shops like ours,” Mr. Podolsky says.