The McGraw-Hill Companies, Inc. (MHP)
The Company is a global information services provider serving the financial services, education and business information markets with a wide range of information products and services.
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McGraw-Hill, parent company of Standard & Poor's, is going to have their hands full getting to the bottom of the current ratings scandal. Looks like Moody's may have some problems and who would imagine that during the earlier part of this decade S&P could be competitive without adopting the same dumb (and possibly fraudulent) rating criteria in order to win business. With all of the uncertainty surrounding S&P I'll play it safe and give its parent a big, fat UNDERPERFORM until further notice.
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At last, the rating services will be held accountable for their extensive role in this economic meltdown.
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MHP does not have a lot of upside at the current price, but there is a MASSIVE downside if S&P are found liable for the AAA bond rating for SIVs and other asset backed securities.
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The California School Budget cuts alone are reason to expect negative sales growth, not to mention every other state in the union as well as a lagging Standard and Poors.
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Rating agency, magazine publishing and textbook publishing businesses are all in secular decline. The credit analytics business should be fine but it's not worth $7 billion.
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Once the Congressional hearings start, and although Fannie & Freddie are probably the key guilty parties, the credit rating agencies will not be able to avoid the clear symbiotic relationship with the complex and poor undersecured debt that came in the back door of the credit rating agencies and went out the front door with its approval. The credit rating acencies of Moody's and Standard and Poor's will be stripped of their competitive advantage, moat and come under future strict scrutiny of govenrment oversight.
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Still has more room to go down. I see low 30's. No one wants what they are offering anymore. Revenue, growth and any interest from anybody is gone.
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Textbook publisher. Will be hurt by students scanning, uploading, and downloading their textbooks online (such as from Textbook Torrents) as well as an increasing move to open courseware (such as MIT's OpenCourseWare). Will be hurt in the long run.
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