Expectations Investing - (Heilbrunn Center for Graham & Dodd Investing) by Michael Mauboussin & Alfred Rappaport (Hardcover)

About the Book

Most investment books try to assess the attractiveness of a stock price by estimating the value of the company. Expectations Investing provides a powerful and insightful alternative to identifying gaps between price and value.

Book Synopsis

Most investment books try to assess the attractiveness of a stock price by estimating the value of the company. Expectations Investing provides a powerful and insightful alternative to identifying gaps between price and value.

Michael J. Mauboussin and Alfred Rappaport suggest that an investor start with a known quantity, the stock price, and ask what it implies for future financial results. After showing how to read expectations, Mauboussin and Rappaport provide a guide to rigorous strategic and financial analysis to help investors assess the likelihood of revisions to these expectations. Their framework traces value creation from the triggers that shape a company's performance to the impact on the value drivers. This allows a practitioner of expectations investing to determine whether a stock is an attractive buy or sell candidate.

Investors who read this book will be able to evaluate stocks of companies in any sector or geography more effectively than those who use the standard approaches of most investors. Managers can use the book's principles to devise, adjust, and communicate their company's strategy in light of shareholder expectations.

This revised and updated edition reflects the many changes in accounting and the business landscape since the book was first published and provides a wealth of new examples and case studies.

Review Quotes

In Expectations Investing, Michael Mauboussin and Al Rappaport build off the simple yet powerful observation that a company's stock price embeds expectations. They then offer investors a rigorous method to identify gaps between what the price reflects and what is likely to happen. Truly a must have in any investor's library.--Annie Duke, author of Thinking in Bets and How to Decide

A 'top personal finance book' selection. Investors will be able to evaluate companies' stocks more effectively after reading this book and gain useful insights from the examples and case studies too.

-- "Top Best in Singapore"

A must-read if you are pondering the best way to value certain start-up and technology companies.

-- "Enterprising Investor"

A revised and updated Expectations Investing by Michael Mauboussin and Al Rappaport was released in 2021 by Columbia University Press and it's the best investing book I've ever read! Period.

-- "The Motley Fool"

This book is a special one. It's a classic that ... has been revised for modern time[s]. If you have been in the investmentverse, Michael Mauboussin and Alfred Rappaport don't need an introduction. They are both pillars in investment research. Mr. Mauboussin is known for his top-notch research and knowledge. Al Rappaport is professor emeritus at Kellogg School of Management and one of the most respected experts on markets. Most financial textbooks share three things in common: massive, boring and expensive. Not this one. Expectations Investing is 272 pages of wisdom.

-- "Brian Langis blog"

As I read the new edition of the book, it is clear that Al and Michael are writing a book for the times that we are in, with much more attention paid to disruption, and the value it creates and destroys, and user/subscriber platforms, which can be exploited for gain and thus provide optionality.--from the foreword by Aswath Damodaran

In this book Mauboussin and Rappaport teach readers how to achieve an investing edge by inverting a conventional investing process. The market's expectations as implied by the current stock price are assessed before an analysis about how that price might change in the future. This method is straight up Charlie Munger-style inversion. Since margin of safety can be restated as a discount to expected value, understanding this process is invaluable.--Tren Griffin, author of Charlie Munger: The Complete Investor and A Dozen Lessons for Entrepreneurs

Mauboussin is a prolific researcher but also a gifted writer, and he puts those abundant talents to good use in [Expectations Investing: Reading Stock Prices for Better Returns] with [Alfred] Rappaport. Laden with examples and checklists and thoughtfully organized, it is a good and very readable manual for experienced and novice analysts alike.-- "Morningstar's Recommended Reading List"

Expectations Investing was one of the first books that sparked my interest in investing. The core idea is as powerful as any, and the authors explain it in a way that makes it unforgettable. This excellent update to the original classic is must reading for all investors.--Patrick O'Shaughnessy, CFA, CEO, O'Shaughnessy Asset Management, and author of Millennial Money: How Young Investors can Build a Fortune

Mauboussin and Rappaport's approach to corporate valuation is as relevant and intelligent today as ever. Understanding expectations, assessing competitive strategy, appreciating optionality, and a laser focus on cash flow will make you a more effective investor in private or public markets.--Bill Gurley, General Partner, Benchmark Capital

One of the few investing books that gave me an 'ah-ha' moment and changed how I think about investing.--Morgan Housel, Partner, The Collaborative Fund, and author of The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness

About the Author

Michael J. Mauboussin is head of Consilient Research at Counterpoint Global, Morgan Stanley Investment Management. He is an adjunct professor of finance at Columbia Business School. His books include More Than You Know: Finding Financial Wisdom in Unconventional Places (Columbia, updated and expanded edition, 2007); Think Twice: Harnessing the Power of Counterintuition (2009); and The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing (2012).

Alfred Rappaport is the Leonard Spacek Professor Emeritus at Northwestern University's Kellogg School of Management. He is the author of Creating Shareholder Value (revised edition, 1997) and Saving Capitalism from Short-Termism: How to Build Long-Term Value and Take Back Our Financial Future (2011). Rappaport has been a guest columnist for the Wall Street Journal, the New York Times, the Financial Times, Fortune, and BusinessWeek.