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Value & great businesses

Expectations Investing

Michael Mauboussin & Alfred Rappaport

Don't forecast the future - read the growth the current price already assumes, then bet only when that bar is clearly too high or too low.

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Chapters

12
  1. Chapter 01The Case for Expectations InvestingThe stock price is already a bundle of expectations about future cash - your job is to read them, not invent your own forecast.Read this chapter →
  2. Chapter 02How the Market Values StocksA share is worth the cash it will throw off over its life, discounted to today - not this quarter's EPS.Read this chapter →
  3. Chapter 03The Expectations InfrastructureValue breaks into three drivers - sales growth, operating margin and investment needs - flowing from triggers through factors.Read this chapter →
  4. Chapter 04Analyzing Competitive StrategyA company can only beat expectations if its competitive position allows it; strategy tells you whether the market's hopes are achievable.Read this chapter →
  5. Chapter 05Estimating Price-Implied ExpectationsInstead of guessing a company's future, run the valuation backwards to see exactly what future today's price is assuming.Read this chapter →
  6. Chapter 06Identifying Expectations OpportunitiesAn opportunity exists only when your reasoned view differs from what the price assumes - that difference is the expectations gap.Read this chapter →
  7. Chapter 07Buy, Sell, or Hold?Buy when the stock is well below expected value, sell when expectations get too high, hold when the gap is small.Read this chapter →
  8. Chapter 08Beyond Discounted Cash FlowFor young, uncertain companies part of the value is the option to expand or pivot later - flexibility one DCF path misses.Read this chapter →
  9. Chapter 09Across the Economic LandscapeThe same three value drivers behave differently in a factory, a service firm and a software business.Read this chapter →
  10. Chapter 10Mergers and AcquisitionsAn acquisition creates value only if synergies exceed the premium paid; most big deals just transfer wealth to the seller.Read this chapter →
  11. Chapter 11Share BuybacksA buyback builds value only when a company buys its own shares for less than they're worth - above value it merely shuffles cash.Read this chapter →
  12. Chapter 12Sources of Expectations OpportunitiesMispriced expectations come from behavioral errors and short horizons - your edge is a reasoned view the crowd hasn't yet adopted.Read this chapter →

This is my own plain-English understanding of the book’s ideas, in my own words with my own ₹ examples, laid out against the book’s real chapters so you can relate the two. It is not the book and reproduces none of its text - if it helps, please buy the book. Not affiliated with the author or publisher. The author is not SEBI-registered; nothing here is investment advice.