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Apple stock level 'makes no sense': Bill Miller

Matthew J. Belvedere
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Value investor pioneer Bill Miller-with a hot hand after buying Netflix (NFLX) and Best Buy (BBY) last year-is now talking up Apple (AAPL).

In an interview Tuesday on CNBC's " Squawk Box ," Miller made a case for why he thinks Apple shares are trading at ridiculously low levels of about $476 each as of Monday's closing price. "It just makes no sense for Apple to trade where it is: Seven times enterprise value to free cash flow."

As a comparison, "if Apple was a junk bond it would trade 40 percent higher," said Miller, portfolio manager of the Legg Mason (LM) Opportunity Trust, which returned nearly 40 percent in 2012. The fund has $1.5 billion in assets under management, and Apple is one of its top 10 holdings.

Miller said an Apple "double is probably not likely" in the next 12 to 24 months. "[But] if it takes two years to get back to where it was a year ago, it's 50 percent" higher from current levels.

Apple stock has dropped more than 30 percent since its all time highs of more than $700 a share back in September 2012.

But, Miller explained, the psychology game surrounding a stock can turn around on a dime. "When Netflix was at $60 and now it's $300, that was a year ago. Best Buy was $13, now it's $38. The psychology can change quickly."

As for the overall stock market, Miller said he agrees with billionaire investors Carl Icahn and Warren Buffett: "The market is roughly fairly valued."

"Last year, you could buy things and we bought them last fall-Netflix in the $60s, Best Buy at $13 a share-where it was pretty obvious," said Miller.

"The risk-reward was fantastic," he continued. "[But] it's very hard to find things that you can say would reasonably have a chance to be up 50 percent to 100 percent in the next 12 to 24 months."

On the Federal Reserve, Miller said he had no idea if the central bank will start to taper its $85-billion-a-month bond-buying program sometime this year. The Fed declined to make changes at its September meeting. Policymakers meet again this month and in December.

"The Fed is running a giant experiment, and we don't know what the answer to the experiment is going to be," he said. "We're playing it out in real time."

-By CNBC's Matthew J. Belvedere . Follow him on Twitter @Matt_SquawkCNBC .

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