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