3 Rating Providers — 1 Buy & 2 Holds

Article Excerpt

These three credit rating companies make money by providing investors with information that will help them make better decisions. However, big writedowns of securities backed by subprime mortgages in the past few months have hurt the liquidity of old bonds as well as demand for new bonds. Unexpected writedowns of investment grade securities have also prompted investors to sue the rating agencies. They claim rating providers deliberately over-estimated the quality of certain securities to secure future fee revenue from issuers. As well, governments are now examining the role credit rating agencies played in the recent crisis. Increasing regulation could limit their ability to issue ratings on certain types of securities, and raise costs. However, all three are doing a good job controlling costs, which will help them thrive once the current crisis passes. We still have a high opinion of their businesses, brands and long-term earnings potential. However, only one is a buy right now. MCGRAW-HILL COMPANIES LTD. $38 (New York symbol MHP; Conservative Growth…