Summary of Michael J. Mauboussin & Alfred Rappaport's Expectations Investing

By IRB Media

Please note: This is a companion version & not the original book.

Book Preview: #1 The central theme of this book is that the ability to read market expectations and anticipate revisions of those expectations is the springboard for earning superior long-term returns. Stock prices express the collective expectations of investors, and changes in those expectations determine investment success.

#2 Expectations investing is a practical application of corporate finance principles that many companies have used for decades. It incorporates the concepts of value creation and competitive strategy analysis.

#3 The disappointing performance of professionally managed funds is not an indictment of active management, but rather reflects the suboptimal strategies used by many active professionals.

#4 Expectations investing draws from finance theory to pinpoint the market's expectations. It then taps appropriate competitive strategy frameworks to help investors anticipate revisions in expectations.

• Language: English
• Publisher: IRB Media
• Release date: Mar 17, 2022
• ISBN: 9781669364290

IRB Media

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Book preview

Insights on Michael J. Mauboussin & Alfred Rappaport's Expectations Investing

Contents

Insights from Chapter 1

Insights from Chapter 2

Insights from Chapter 3

Insights from Chapter 4

Insights from Chapter 5

Insights from Chapter 6

Insights from Chapter 7

Insights from Chapter 8

Insights from Chapter 9

Insights from Chapter 10

Insights from Chapter 11

Insights from Chapter 12

Insights from Chapter 1

#1

The central theme of this book is that the ability to read market expectations and anticipate revisions of those expectations is the springboard for earning superior long-term returns. Stock prices express the collective expectations of investors, and changes in those expectations determine investment success.

#2

Expectations investing is a practical application of corporate finance principles that many companies have used for decades. It incorporates the concepts of value creation and competitive strategy analysis.

#3

The disappointing performance of professionally managed funds is not an indictment of active management, but rather reflects the suboptimal strategies used by many active professionals.

#4

Expectations investing draws from finance theory to pinpoint the market's expectations. It then taps appropriate competitive strategy frameworks to help investors anticipate revisions in expectations.

#5

The asset-weighted expense ratio for actively managed U. S. equity mutual funds averages about 0. 68 percent of asset value. In contrast, the equivalent expense ratio for passive funds is 0. 09 percent of asset value.

#6

The shift from identifying mispriced stocks to minimizing the variance from the benchmark has resulted in a decline in active share, a measure of how different portfolios are from their benchmarks. This has reduced the probability of outperforming benchmark indexes and index funds.

#7

Expectations investing helps identify undervalued stocks to buy or hold, and overvalued stocks to avoid or sell in the investor’s target universe. It not only helps investors identify undervalued stocks, but it also helps them identify overvalued stocks.

#8

The long-term discounted cash flow model is the right tool to read expectations because it mirrors the way the market prices stocks. Investors can be agnostic about the investment opportunity because the goal is to simply understand what financial expectations