Need for credit ratings still strong

Article Excerpt

Right now, the U.S. credit-rating industry is dominated by three firms: Standard & Poor’s (which is owned by McGraw-Hill, below), Moody’s and Fitch. However, Standard & Poor’s recent downgrade of U.S. Treasury bonds has drawn new attention to the entire industry. This increased scrutiny makes it more likely that regulators will open up the industry to more competition. Regulators could also force these firms to disclose how they make their decisions. Even with these challenges, we feel credit-rating providers like the three we analyze below will continue to play a vital role in the global economy. Moreover, the recent stock-market turmoil is prompting many investors to turn to bonds. That should continue to fuel demand for bond ratings, in particular. MCGRAW-HILL COMPANIES INC. $41 (New York symbol MHP; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 301.3 million; Market cap: $12.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.4%; TSINetwork Rating: Average; gets 60% of its revenue from its Standard & Poor’s division,…

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