#10 Michael Mauboussin: Expectations Investing
Investing by the Books
Is Al Rappaport Like Your Mentor?
Al Rappaport's Creating Shower Value was for me a professional epiphany. The three lessons that I learned from that is that it's about cash, not accounting numbers. Strategy and valuation have to be thought up together when you're doing valuation work. And stock prices reflect a set of expectations.
Michael Mauboussin is a thought-leader on decision-making, the role of complexity in markets, and most topics related to investing. His latest contribution to the investor community is the updated version of "Expectations Investing", published in 2021. To us, the book is a must-read and our conversation with Michael is both an introduction to the big concepts as well as an in-depth exploration into the art of valuing stocks.
For more info about the podcast, go to the episode page.
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Episode Chapters
(00:00) Intro to Mauboussin & Expectations Investing
(04:05) Michael’s motivation to educate
(05:35) Reading stock prices for better returns
(08:39) Expectations Investing - more useful than ever
(11:58) Earning the right to use valuation multiples
(15:46) Is long-termism an edge?
(19:12) Expectations Investing: Step 1 - Price-implied expectations
(36:46) Expectations Investing: Step 2 - Most important triggers
(1:01:07) Expectations Investing: Step 3 - Buy and sell decisions
(1:08:38) Portfolio concentration and small caps investing
(1:13:49) The concepts of real options and reflexivity
(1:20:48) Overprecision and confirmation bias
(1:25:48) Automation vs human judgement in the investing process
(1:29:19) Gary Klein’s pre-mortem
(1:33:28) Michael’s work in progress
(1:36:53) Three life-changing books
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Articles & Books Mentioned
- Expectations Investing - Michael Mauboussin, Alfred Rappaport (1st Edition 2001, updated 2021)
- More Than You Know - Michael Mauboussin (2006)
- Think Twice - Michael Mauboussin (2009)
- The Success Equation - Michael Mauboussin (2012)
- Creating Shareholder Value - Alfred Rappaport (1986)
- Expert Political Judgment - Philip Tetlock (2005)
- The Base Rate Book - Michael Mauboussin (2016)
- The Impact of Intangibles on Base Rates - Michael Mauboussin (2021)
- Measuring the Moat - Michael Mauboussin (2016)
- Gambling with the House Money and Trying to Break Even - Richard H. Thaler, Eric J. Johnson (1990)
- Dollars and Sense - Dan Ariely, Jeff Kreisler (2017)
- Public to Private Equity in the United States - Michael Mauboussin (2020)
- Do Stocks Outperform Treasury Bills? - Hendrik Bessembinder (2017)
- An Engine, Not a Camera - Donald Alexander Mackenzie (2006)
- Noise - Daniel Kahneman, Olivier Sibony, Cass R. Sunstein (2021)
- Complexity - M. Mitchell Waldrop (1993)
- Consilience - Edward O. Wilson (1999)
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Companies Mentioned
- Amazon
- Berkshire Hathaway
- Costco
- Domino’s Pizza
- Shopify
- Tesla
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More on Michael Mauboussin
About: http://michaelmauboussin.com/
Expectations Investing: https://www.expectationsinvesting.com/
Twitter: https://twitter.com/mjmauboussin
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What is Investing by the Books?
Investing by the Books was founded by Henrik Andersson, Bo Börtemark, Mats Larsson and Michael Persson. It has published hundreds of book reviews in the past 10 years and operates on a non-profit basis.
Visit the website: http://www.investingbythebooks.com/
Follow on Twitter: https://twitter.com/Investbythebook
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What is Redeye?
Redeye is a research-centered boutique investment bank from Stockholm. Founded in 1999, Redeye cultivates investors through timeless knowledge, a humble attitude, and a strong focus on quality.
Visit the website: https://www.redeye.se/
Follow on Twitter: https://twitter.com/Redeye_
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Disclaimer
Notice that the content in this podcast is not, and shall not be construed as investment advice. This information is meant to be informative and for general purposes only. For full disclaimer, visit Redeye.se
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