Sitting in with Herman Miller (MLHR)

Herman Miller (MLHR), a Ten Grand Chicago holding hasn't been performing for quite some time. Based on my analysis at the time, I considered a good value and strategic play. The office furniture market has tanked along with every thing else in the economic crisis, so it's time to look back on my initial analysis and start doing some in depth coverage of what has happened since then, and what Herman Miller must do to survive this year, or should I say "float" and stay even?

Over the next several posts, I will be compiling some of my analysis for Herman Miller. For starters, a good place to get some industry trend information is from BIFMA (The Business and Institutional Furniture Manufacturer's Association). The forecast they had published for 2009 wasn't pretty, suggesting a 11% drop in proudction of office furniture from 2008. That was last November. There are interesting product category segment nuggets at the BIFMA website. We'll start from the top, and work our way down to Herman Miller's operations from there.

Stay tuned.

Educational Heat

"Don't let yourself get attached to anything you are not willing to walk out on in 30 seconds flat if you feel the heat around the corner". -- DeNiro in Heat

This is pretty much how I view all the for-profit education sector stocks these days. The sudden shift in my perception is due to the increasing popularity of this sector and the high valuations investors have put on these stocks. The economic recession is in full swing, and many investors have piled into these educational stocks on the premise that layed off workers will head back to school to gain new skill sets. What started out as an interesting nugget buried in the ISM Services Report last February led me to DeVry (DV) and Strayer (STRA). I had passed on Strayer due to its lofty valuation, and picked up DeVry on their impressive business performance and attractive valuation. The stock has since reached close to the top end of my valuation of $61/share, and due to the high P/E's exhibited by these stocks, it was time to leave. 37% return isn't bad.

Here are some of the current P/E ratios (ttm) for these companies:

DeVry : 30
Strayer: 42
ITT Educational Services: 24
Corinthian Colleges: 72 <-- WOW
Career Education Corporation: 55
Apollo: 27

For comparison sake, this is a chart I pulled together last year of these stocks mapped against the S&P500 during the last economic melt down. It was a rather impressive run back then. The environment is different now to say the least, and the "heat" is on. Time to wait until valuations get back into order.