'Warts and Hair' Aside, Big Investor Likes Groupon, Apple

Why Bill Miller Likes Groupon

The share price of struggling daily deals company Groupon surged Friday, after investor Bill Miller gave the company an unexpected endorsement.

Saying that he liked the stock "a lot," Miller told CNBC's "Squawk Box" in an interview that he was "more attracted to stuff that has warts on it and hair and all that kind of stuff."

That description includes Apple, which has taken a beating at the hands of investors amid questions about its ability to innovate. Miller also endorsed the company's fundamentals, arguing they have taken a back seat to overwhelming market pessimism.

The portfolio manager of the Legg Mason Opportunity Trust fund—which returned nearly 40 percent in 2012—acknowledged that fired Groupon CEO Andrew Mason is a "smart guy" and did a great job building the company, but added the business may have been too complex for him to manage.

(Flashback: Andrew Mason Out as Groupon CEO)

Chairman Eric Lefkofsky and Vice Chairman Ted Leonisis will lead the company on an interim basis.

Making a case for the battered website, Miller said that "Groupon's got a $1.2 billion of cash. They have no debt." Although investors have been wary of Groupon, Miller argued that "the opportunity [here] is tremendous. Expectations are low. The stock is very cheap."

He said his average cost of Groupon stock is about $5 a share.

Bill Miller's Taste For Apple

Miller also likes tech giant Apple at these levels, after the stock's dizzying fall from all-time highs this past fall.

"The market has gotten obsessive about the quarter," he said, at the cost of paying attention to Apple's still attractive fundamentals. "Valuation has been completely lost on people."

Saying that Google and Apple are running neck and neck this year in terms of their earnings per share, Miller seemed surprised that the search giant's stock price is nearly double that of the the iPhone maker's. "Google is $800 and Apple is $400-and-something," he said.

Apple has tracked earnings estimate revisions lower, he added. "I think when the quarter is over, the estimate revisions will be done" and that will help the stock.

"There's [also] a new product-cycle with the iPhones this summer that tends to get the stock going."

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Miller said he cut his position in Apple "close to the highs" last fall. "[But] we're now overweight Apple. We completed the position just a couple of days ago."

Bill Miller on What's Driving the Markets

As for the recent rally in the overall stock market, he said, "There's a lot more to go. I think stocks are cheap."

The Dow Jones Industrial Average closed higher Thursday for the tenth straight session — the first time that's happened since 1996.

"The question really is not so much are you at a new high, it's what kind of return can you expect from stocks," Miller stated. Key for investors is whether stock returns can outpace those seen in other asset markets.

"The key thing for investors is you're looking at 2.5 percent S&P dividend yield and a double digit growth rate. That certainly beats bonds by a mile," he said.

Miller added: "Over the next few years, the risk [on stocks] is actually that people get exuberant about stocks...and valuations go lot higher."

Still, former Fed Chairman Alan Greenspan told CNBC Friday that his famous "irrational exuberance" phrase would be the last term he'd use to describe current market conditions.

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