UPDATE 1-Legg's Miller: No clear case for buying financials

(Adds analyst comment, Miller's fund's details, byline)

By Muralikumar Anantharaman

BOSTON, July 30 (Reuters) - Bill Miller, stock picker at U.S. asset manager Legg Mason Inc (LM.N: Quote, Profile, Research), said on Wednesday financial stocks appear to have hit a "capitulation low" in mid-July but added it was not clear if they should be bought now.

Miller, whose main Value Trust fund has rebounded in July but is still the worst performer among peers this year, said the "frenzy" over the capital concerns of mortgage finance firms Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research) "sent financials to what looks like a capitulation low on July 15."

But despite their extremely low valuations, Miller, in his quarterly letter to Value Trust shareholders, did not make a case for buying financial stocks at these levels.

"Is it obvious financials should be bought now, having reached the most oversold levels since the 1987 Crash, and the lowest valuations since the last great buying opportunity in 1990 and 1991? Or is it obvious they should be avoided, since the credit problems are in the papers every day and write-offs and provisioning will likely continue into 2009," Miller wrote in his July 27 letter, which was released on Wednesday.

"When I ask what is obvious now, there is little consensus," Miller wrote.

Miller, 53, is the only manager to have beaten the Standard & Poor's 500 index for 15 years in a row through 2005. But his performance has deteriorated since and has plunged in 2008, hurt by its sizable holdings of financial stocks such as Citigroup (C.N: Quote, Profile, Research), Merrill Lynch MER.N and Freddie Mac.

The fund is down 28.93 percent in 2008 through Tuesday's close compared with the S&P 500's negative 13 percent return, according to Lipper Inc data. It has also shrunk in size to $9.7 billion as of the end of June from about $17 billion at the end of 2007.