Speculating on McGraw Hill

Standard-and-poors-300x168McGraw Hill (MHP) is the parent company of Standard and Poors (S&P), the credit rating agency.  On February 4th McGraw Hill announced that it expected a Government lawsuit regarding S&P’s alleged fraud.  The alleged fraud relates to mis-rating mortgage-backed securities.  News of this lawsuit sent the stock tumbling from $58.34 on 1st February to $42.67 on 8th February (down 27% in a week).

Screen Shot 2013-03-01 at 12.40.14 PM

The stock has recovered some 11% to $47.24, but it is still 16% down on recent highs.  I expect the stock to recover to recent highs within a couple of months.

  • Buy MHP @$47.24

This is a “special situations” trade and will be part of my speculative portfolio.  I must set careful stops to limit losses or protect profit.  I will sell on 5% drop (@ $44.88) and will sell the whole position if it gets back to $58.

POSTMORTEM

Writing today, 30th March, this looks like a great call.  MHP is up over 10% in a month.

Screen Shot 2013-03-31 at 9.54.14 AM

UPDATE

Writing today, 24th April, I have decided to get out of McGraw-Hill.  The stock has stalled at $52, which gives me a nice 10% profit (with TD Waterhouse taking 3% in foreign exchange fees! – 1.5% on buying and 1/5% on selling).

  • Sell MHP @ $52.00
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