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Legendary stock picker: Amazon, airlines to soar

Legendary stock picker Bill Miller said Wednesday the nation's biggest airlines and e-commerce giant Amazon are greatly misunderstood.

The knock on Amazon from critics is the company generates lots of revenue but little profit. But that's exactly why Miller likes the stock.

"As long as people say Amazon doesn't make any money I will know that it is misunderstood and probably mispriced," said the chairman and chief investment officer of Baltimore-based LMM Investments, a partially owned subsidiary of Legg Mason, with $2.9 billion of assets under management.

Read MoreBill Miller: Now is a perfect time to buy US stocks

"When Amazon came public [in 2002] it had a $400 million market cap. It's a $250 billion market cap right now," Miller told CNBC's "Squawk Box," questioning how it made such a big jump without making money. "The answer is ... there's a difference between creating economic value and reporting GAAP accounting profits."

Miller also pointed to the online retailer's Amazon Web Services (AWS) arm, which is currently an $8 billion business, "growing 80 to 100 percent a year."

"[AWS] is two to three years ahead of Google, Microsoft [and] IBM in the cloud business," he continued, saying he believes AWS could become as big as the $90 billion retail business at Amazon.

"[Overall] you have global company which has a dominate position and no competition as far as the eye can see," he contended, predicting the company could be worth as much as double the current value.

LMM holds shares of Amazon, as does the Legg Mason Opportunity Trust fund, a portfolio Miller also manages.

As for the airlines, specifically American, United Continental and Delta, Miller sees a "long period of prosperity ahead."

Delta has fared better this year, only down about 1 percent, compared to the 18 percent decline for American and 14 percent drop for United.

"That's because they're up 80 percent a year for each of the past three years," he argued. "Our average cost for all three is around $7 [per share]."

Read MoreCEO: Different fare classes giving Delta a boost

"The other side of airlines is 100 years of terrible economics and three years of good economics [means] people aren't convinced yet," he added. "It takes awhile for the market to change."

Flying capacity for the major airlines is at 1982 levels, when the economy and the population of the nation were much smaller, Miller said, bolstering his case for more room to grow.

As a passenger, airlines finally have the money to compete on service after years in and out of bankruptcy, he said. "You're actually going to have a better flying experience in the next few years."

LMM and the Legg Mason Opportunity Trust fund both own shares of American, United and Delta.

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