After 30-year-old Harold W. “Terry” McGraw III helped his father fend off a hostile takeover from American Express Co. more than three decades ago, McGraw-Hill Cos. shareholders were rewarded with an 11 percent annualized return through 2012.
The U.S. lawsuit against Standard & Poor’s raises pressure to accelerate competition in the ratings industry while the government itself has adopted rules that left the business dominated by the same companies whose flawed grades sparked the worst financial crisis since the Great Depression.
McGraw-Hill Cos., accused by the U.S. of misleading investors about the risks of mortgage bonds that helped ignite the credit crisis, reported the highest sales at its Standard & Poor’s unit since at least 2010, while posting a net loss because of the divestiture of its education unit.
Investors should buy stock in McGraw- Hill Cos., owner of Standard & Poor’s, as the risk posed by the U.S. lawsuit against the credit-rating company is manageable, according to Peter Appert, an analyst at Piper Jaffray & Co.
Standard & Poor’s increased the risk of investing in the bond-rating service’s owner and its biggest competitor by taking away the U.S.’s AAA designation, according to Peter Appert, a Piper Jaffray & Co. analyst.