In brief

  • Bill Miller is value investor who likes Bitcoin.
  • MicroStrategy is a business that sold securitized debt to finance larger Bitcoin purchases.
  • In an investor letter, Miller explained why his fund bought the MicroStrategy bonds.

Bill Miller, a value investor whose estimated net worth is close to $1 billion, sees plenty of value in Bitcoin—and, by extension, the publicly traded company that owns more than $2.3 billion of it.

In an investor letter dated January 21, he explained Miller Value Funds’ recent purchase of MicroStrategy’s 0.75% convertible bond. It’s all about the Bitcoin.

MicroStrategy, a business intelligence company that trades on Nasdaq, holds 70,784 Bitcoin (after it purchased another $10 million worth this week), currently valued at $2.3 billion. After already betting big on BTC throughout 2020, late last year the Michael Saylor-led company sold $650 million in debt securities in order to buy more.

Miller’s firm bought the convertible security, which pays out 0.75% in annual interest and can be converted into stock and/or cash, depending on several factors.

“In our assessment there was very little downside and an almost-free call option on Bitcoin,” he wrote. “MicroStrategy now owns more Bitcoin than any operating company, which imbues some scarcity value above and beyond the value of the core business and the coins it holds.”

Since Miller’s investment hinged on MicroStrategy going long on Bitcoin, the investor laid out the case for owning Bitcoin.

“Almost every long-term holder of Bitcoin has earned a higher rate of return in Bitcoin than in anything else, and those who understand it see little reason to put their excess marginal liquidity into other assets at this point,” Miller wrote. “The world is ruled by fat-tail events, or seemingly improbable occurrences that have an outsized impact, and all indicators so far point to Bitcoin being one.”

Value investors basically look for stocks and other assets they think are trading below their “value” and invest in them. Though that doesn’t sound particularly groundbreaking, the strategy requires investors to ignore day-to-day price fluctuations and instead invest over the long term. In other words, they’re HODLers, which is why Miller can ignore Bitcoin’s price volatility and look at it instead as a store of value.

Just like he and MicroStrategy CEO Michael Saylor must ignore the company's stock price. Since MicroStrategy's market capitalization is around $5.4 billion, and $2.3 billion of that comes from Bitcoin, its share prices tend to go up and down with the price of BTC—which shed $5,000 in value between Wednesday and Thursday before rebounding somewhat today.

Miller isn’t concerned: “Not owning any Bitcoin has been a massive mistake, and we expect that will continue to be true.”