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Background
Based in Baltimore, Maryland, Legg Mason Capital Management (LMCM) is a wholly owned subsidiary of Legg Mason, Inc. The firm specializes in the management of U.S. equity securities.
Assets Under Management
$44.3 billion (as of 3/31/08)
Philosophy
LMCM's investment philosophy has the following tenets:
The value of a company is the sum of the present value of its future free cash flows. The intelligent generation and use of cash, not accounting profits, create shareholder value.
Although markets broadly reflect company values, mispricings occur. LMCM views the market as a complex adaptive system that is normally efficient and quickly adjusts to new information; however, the market needs diversity (e.g. of participants, views, objectives) to remain efficient. Occasionally, diversity breaks down and mispricings occur. Diversity most commonly breaks down because of behavioral anomalies (e.g. fear, panic or greed) or widely misunderstood business models. LMCM attempts to identify and exploit these mispricings.
Risk should be assessed at the security level and managed at the portfolio level. In most instances, investment managers have little or no control over the companies in which they invest. They can only (i) assess the business model and management's ability to execute and (ii) identify the scenarios in which the model and management are likely to succeed or fail. Investment managers can, however, manage risk at the portfolio level by constructing a portfolio of securities with the highest probability of delivering excess returns under diverse scenarios.
www.leggmasoncapmgmt.com
www.leggmason.com
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Legg Mason Funds
Legg Mason American Leading
Companies Trust
Legg Mason Growth Trust
Legg Mason Opportunity Trust
Legg Mason Special Investment Trust
Legg Mason Value Trust
Investment Managers:
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