Topic: Growth Stocks

Wall Street Stock Forecaster Hotline – Friday, February 8, 2013

Article Excerpt

MCGRAW-HILL COMPANIES INC., $42.15, New York symbol MHP, fell over 25% this week after the U.S. Department of Justice announced that it is suing the company’s bond-rating subsidiary, Standard & Poor’s, over its role in the 2008 financial crisis. The Justice Department has accused Standard & Poor’s of failing to downgrade mortgage-backed securities, even though it knew home prices were falling and borrowers were having trouble repaying their loans. Bond issuers pay Standard & Poor’s to evaluate their securities. A bad rating could prompt these clients to take their future business to other rating agencies. This raises a potential conflict of interest with investors who rely on its bond ratings. If it loses, McGraw-Hill would be liable for $5 billion in damages. That’s equal to 43% of its $11.7-billion market cap (the value of all its outstanding shares). The company is also facing similar lawsuits from a number of U.S. states. McGraw-Hill plans to fight these allegations. It also stated that other agencies…