Expectations Investing: Reading Stock Prices for Better Returns

October 31, 2020
Expectations Investing: Reading Stock Prices for Better Returns

Expectations Investing offers a unique and powerfulalternative for identifying value-price gaps. Rappaport andMauboussin provide everything the reader needs to utilize thediscounted cash flow model successfully. And they add an importanttwist: they suggest that rather than forecasting cash flows,investors should begin by estimating the expectations embedded in acompany's stock price. An investor who has a fix on the market'sexpectations can then assess the likelihood of expectationsrevisions. To help investors anticipate such revisions, Rappaportand Mauboussin introduce an “expectations infrastructure” frameworkfor tracing the process of value creation from the basic economicforces that shape a company's performance to the resulting impacton sales, costs, and investment. Investors who use ExpectationsInvesting will have a fundamentally new way to evaluate allstocks, setting them on the path to success. Managers will be ableto use the book to devise, adjust, and communicate their company'sstrategy in light of shareholder expectations.