Tuesday, 14 December 2010

MLHR (Herman Miller) and its 401k

Shady Going On’s MLHR.

Main institutional holders of MLHR stock as at 30th September.



% Out







Sep 30, 2010





Sep 30, 2010

Within Herman Miller 401k there was a holding of 4,230,566 shares. This represents around 8% of the company.

Wellington and Vanguard Funds are also held by the 401k and surprisingly also hold significant portions of MLHR.

Total holding by what I would consider “insiders & friends” is around 16%. This is very significant holding.

In the UK its probably bordering on illegal to have the pension scheme not diversify the risk.

By both the 401k and the underlying funds holding MLHR stock, stop extreme price movements.

Even worse is that the total fund assets was $377,265,055 at the end of which $81,353,789 represented MHLR stock (excluding that held by the underlying mutual funds).

The underlying mutual funds probably hold another $10,000,000 (at a guess) assuming contracts were awarded to Wellington and Vanguard were on an ‘understanding’ basis.

Without specific disclosure of the funds in the 11k, it is difficult to identify the funds, let alone the underlying holdings.

So around 24% of the 401k plan has underlying stock of the company itself i.e MLHR.

In 2007 the value of these 4m MLHR shares was around $167m. They are currently valued at around £81m. They managed to shave off around 20% of the 401k return just by holding their own stock.

Surprisingly the 11k does not identify comparative investment return’s, given the high level of transparency it has in the markets, I am a little surprised.

I’m surprised that the 401k holders have not sued MLHR for the poor performance, largely due to the significant holding of MLHR stock itself.

Two things can happen;

1) The underlying holders of the 401k may sue MLHR for poor performance given the large proportion of MLHR stock

2) MLHR will need to replace its own stock with something better performing.

Either way it could spell bad news for MLHR share price, with such a large 'insider' holding propping it up.

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About Me

I try and work a broadly market neutral strategy and based purely on fundamentals and my gut feel.