Monthly archives of “April 2022

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The Expectations Investing Process

There are three steps to the Expectations Investing process, which are very logical… number one is understand price implied expectations. What we’re doing is using a sound cash flow model, so we’re mimicking first principles. But in this case, we’re not forecasting what we believe. We’re essentially asking, “what is priced into today’s stock?” Now we can be guided by things like consensus forecast, there’s certainly a component of art in this. But you’re basically saying, “what do I need to believe to justify today’s stock price?” By the way, this is best done with you being agnostic…the second step is identifying expectations opportunities and that’s going to have a couple components. The first is understanding historical results, then you’re going to do your strategy analysis and… figure out which trigger matters the most… and then the final step is just make buy and sell decisions. If you’re doing that last step properly, you’re going to have these outcomes and probabilities associated with them that allows us to estimate expected value and that allows us then to buy at a discount to that which is where we get margin of safety.

– Michael Mauboussin

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Hearing Subtle Things

If you just sit and observe, you will see how restless your mind is. If you try to calm it, it only makes it worse, but over time it does calm, and when it does, there’s room to hear more subtle things – that’s when your intuition starts to blossom and you start to see things more clearly and be in the present more. Your mind just slows down, and you see a tremendous expanse in the moment. You see so much more than you could see before. It’s a discipline; you have to practice it.

– Steve Jobs