Terry McGraw, CEO of McGraw-Hill

This is a partial transcript from Your World with Neil Cavuto, April 29, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

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NEIL CAVUTO, HOST: If you are looking to get a chunk of that $1.4 billion settlement against the brokerage industry, don not hold your breath. But if you are looking for an investment angle on it, don’t look any further than here, maybe. Part of the sweeping deal with regulators, calls on Wall Street to offer up more independent stock and market research. Which is where this guy comes in, Terry McGraw, whose McGraw-Hill companies more than fits the bill.

Terry, good to see you.

TERRY MCGRAW, MCGRAW-HILL CEO (MHP): Hey, good to see you, Neil.

CAVUTO: Do you benefit? Are you planning on that?

MCGRAW: Oh yes, I think we do. We have been benefiting all along. We are the largest independent equity research house on the Street. We.

CAVUTO: Through S&P, right?

MCGRAW: Yes. Some 80 analysts covering some 1400 stocks, all at S&P. And I do believe that, you know, with this settlement that is going to be an added on opportunity for us. Now - but we will see how that all comes out. We have been working with all the brokerage houses all along, anyway.

CAVUTO: Yes. But even the independent research can get blasted too.

MCGRAW: Oh yes.

CAVUTO: And is now everyone getting a little gun shy?

MCGRAW: Well, I think, you know, everybody is, you know, look over their shoulder a little bit. Now from a performance standpoint, we are quite pleased. We have a five-star ranking system, five is a strong buy, one is a sell. And if you take a look at our fours and fives and you couple those and compare them to the S&P 500, over one, three, five, 10, 15 years, annualized, we have been able to beat the market. So I think in terms of those kind of recommendation, we’ve done quite well. Now we will see in terms of, you know, exploiting a business model out of this, that makes a little bit more sense.

CAVUTO: All right. Now let’s talk about that $1 1/2 billion settlement. There are fears out there, Dick Morris was relaying them to me not long ago, that maybe they could be billions more. There are a lot of people saying that it’s going to open up a floodgate of individual class- action lawsuits and this could drag Wall Street down for maybe years. Is it?

MCGRAW: Well, I think that is a little bit overdone. I wouldn’t expect that. I think that the whole role that Eliot Spitzer has played here, you know, has been in general a very positive one. It has certainly been one that is focused on getting trust back into the system. I don’t think people are going to be very sanguine about endless kinds of investigations and those kinds of searches that way. So I don’t see that in the same way.

CAVUTO: All right. Terry McGraw, thanks, always good seeing you.

MCGRAW: Yes. Thanks, Neil.

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