Market Is 20% Undervalued: Legg Mason's Bill Miller

Bill Miller, chairman, chief investment officer and portfolio manager of Legg Mason Capital Management, believes the stock market is 20 percent undervalued.

"I'm bullish — maybe not as bullish as Laszlo Birinyi was this morning," Miller said, referring to the well-known analyst who told CNBC earlier Wednesday that stocks were only halfway through a bull market.

But Miller offered "two ways to think about" a market on the rise.

"When the market bottomed in March of 2009, mid-660s [on the S&P 500], the earnings estimate for the forward 12 months was $54. Right now, we're up about 90 percent from there. And earnings are up about 90 percent. So the estimate this year is about $95."

"So even though the market's up about 90 percent, you're not paying any more today — not much more, just a little more — than you did at the bottom in 2009."

Miller's other bull rationale:

"Only 10 percent of the market's value [now] is based on expectations about the future. That contrasts with the normal of about 30 percent. So you're about 20 percent undervalued on that measure, as well."

Legg Mason Holding:

Legg Mason Capital Management Fund owns 12 million Texas Instruments shares. LMCMF is the 14th largest shareholder in the electronics company.

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Disclosure information was not available for Miller or his company.