Expectations Investing Hardcover – Sep 24 2001
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From Publishers Weekly
Instead of focusing on the short term--earnings per share, price-earnings multiples--Rappaport (Creating Shareholder Value), formerly a professor at Northwestern's Kellogg School of Management, and Mauboussin, chief investment strategist at Credit Suisse First Boston, recommend "expectations investing," which "starts with the current stock price and uses the discounted cash-flow model to `read' what the market implies about a company's future performance." They discuss sample companies (Gateway), historical patterns, competitive strategies and share value. Though they expertly simplify a complex topic, beginners may find the book overly technical. However, the authors' credentials, a national interview campaign and author appearances should attract deserved attention. Tables.
Copyright 2001 Cahners Business Information, Inc.
From the Publisher
Offers a more practical and effective alternative for identifying value-price gaps--the key to superior returns.
Teaches how to value stocks in the new economy, interpret current prices, and determine whether the company's managers are on track.
Practical and teachable, like The Balanced Scorecard.
Introduces a unique Shareholder Value Added (SVA) roadmap for tracing the process of value creation from the basic economic forces that affect a company's resulting value drivers.
Top Customer Reviews
The last decade has taught me that most Wall Street analysts are very intelligent. However, I must report that as a whole, they have *no idea* what they're doing. I'm not sure how it happened, but most investors have come to believe in a hodge-podge of rules-of-thumb that "everyone knows" but nobody can explain. Arbitarily, "growth" investors tell us to "Buy stocks that grow their earnings faster than their P/E multiples!" Just as randomly, "value" investors tell us to "Only buy stocks with low P/E's with lots of book value!" If you try to integrate all these rules of thumbs into a single mental model, you have to make so many exceptions to every rule that your mind feels like Swiss cheese.
In contrast, this book offers a clean, intelligent FRAMEWORK for thinking about investing in anything that produces a stream of future cash flows (including stocks, of course). It's the investing Bible I wish I had when I started my career. It would have shaved years from my investing education, and saved me from numerous migraines.
The book starts with the same first principles you read in your Corporate Finance textbook, makes relevant the practical arcana you learned in Accounting class, and incorporates Porter's and other strategy frameworks into valuation. The book presents a CLEAN and FLEXIBLE way of thinking about stocks. For example, you can apply their approach to Dell from its IPO to today -- and get useful data that would help with a Buy/Sell decision.Read more ›
The first group of authors tell you to look for certain price and volume patterns; that the stock price depends on those patterns because those patterns are a reflection on human behavior.
The second group of authors tell you to look for certain ratios in the financial statements; that the stock price depends on those ratios.
Then there's this book, which tells you that the price could depend on a lot of things, like mergers and acquisitions and the synergy they generate, executive compensation, competitive strategies, stock buybacks, etc. But they don't tell you how to calculate those factors into the stock price. The book is a good book which certainly provokes thought. And it's probably good for finding stocks for the long term investor. But for me, it's a little too impractical. And a little too academic intellectual guru voodoo. When I have money at risk, and I have to make quick decisions (which can affect my net worth), I like to keep things simple and easily measurable which technical and fundamental analysis allows me to do.
In 195 pages, this book presents a bunch of insights. The presentation on valuing a company's stock options, as well as discussion of value capture by buyers/sellers in mergers and acquisitions, are the clearest I've seen in any finance/valuation book. The discussions on incentive compensation, as well as management signals in share buybacks, are also quite impressive and accessible to the general reader. The accompanying website for this book is highly complementary, and presents excel models for all topics covered. I adapted them for a sample company and was quite delighted! While DCF valuations are not every investor's cup of tea, this book goes the farthest in trying to make its DCF-based framework manageable by the average person.
Now for the caveats which I hope are minor - A couple of earlier chapters pack the gist of several MBA classes (corporate finance, strategy, behavioral finance).Read more ›
Most recent customer reviews
I haven't read the book but I saw an unintentionally funny quote on the book jacket. Amongst other people praising the book and urging you to buy it, there is a quote from one... Read morePublished on Sept. 2 2002
I used to always wonder how do investment analysts evaluate stocks.Buffett never beleived in P/E nor P/S or P/CF. Read morePublished on July 9 2002
totally agree with one of the reviewers that this book hasn't made valuation any easier, or more accurate, it's good in its review of the various value drivers and competitive... Read morePublished on April 3 2002 by Seeker
This book starts off on the premise that 1) companies can manipulate eps but not cashflow and 2) rather than engage in all sorts of scenario analysis, look at the securities price... Read morePublished on Feb. 19 2002
Mauboussin was far and away the best professor I had at Columbia Business School. His security analysis course is consistently rated tops by second year students at CBS and I... Read morePublished on Feb. 4 2002 by Michael Benevento
This book is a must read for anyone that invests in the market and wants to make consistent gains in his/her portfolio. Read morePublished on Jan. 23 2002 by Sam
Rappaport and Mauboussin expertly utilize the often misapplied DCF model to identify and analyze market assumptions that determine stock price. Read morePublished on Jan. 20 2002 by Elizabeth Spiers
The book looks very much like Rappaports earlier book Creating Shareholder Value, but from a different angle. The bottom line remains the same. Read morePublished on Jan. 13 2002 by D. Simons
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