Topic: Growth Stocks

The Wall Street Stock Forecaster Hotline – Friday, September 25, 2009

Article Excerpt

MOODY’S CORP., $18.85, New York symbol MCO, fell nearly 20% this week on new allegations that the company deliberately inflated its ratings on mortgage-backed securities and other complex investments. Bond issuers pay fees to rating agencies like Moody’s to rate their bonds. Some investors have sued the company, accusing it of knowingly issuing higher ratings so it didn’t risk losing these fees. Moody’s has denied the allegations. The stock also came under pressure after billionaire investor Warren Buffett lowered his stake in the company to 16.6% from 20.4% last July. As well, a court recently rejected a long-standing defence used by rating agencies that their opinions are protected under free-speech rights. Allegations of unethical behaviour will almost certainly lead to increased government regulation of the credit-rating industry. However, the three main agencies — Moody’s, Standard & Poor’s (see McGraw-Hill, below) and Fitch — will continue to play a vital role in the world’s financial markets. Moody’s is still a hold. MCGRAW-HILL COMPANIES LTD.,…