2021
Framework
by
Michael Mauboussin and Alfred Rappaport
A framework for value investors to reverse-engineer the expectations embedded in a company’s stock price. By quantifying the levels of revenue growth, free cash flow, and strategic optionality implied by the market—and determining how far into the future these assumptions extend—investors can assess whether a stock is mispriced relative to their own analysis.
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July 2025
Grad-level value investing approach. Helps reverse-engineer expectations baked into a stock’s price. Not beginner-friendly, but learnable with effort. Useful for deciding when to exit. I like the Value 3.0 method in Adam Seessel’s "Where the Money Is" for pinpointing a margin-of-safety buy price. Book website has useful math tutorials. Excellent breakdown of 3 ways to estimate continuing value in DCF (with inflation). Strong framework for value creation (triggers, factors, drivers), competitive dynamics, value chain, and tangible vs intangible assets. Step-by-step cost of capital calc was excellent. Read 2021 hardcover.