BOOK REVIEWS

Expectations Investing is a must-read book for those interested in pursuing a career in equity research. Initially recommended to me by one of my mentors, this book provides the framework to understanding how the market values stocks and the 'Expectations Infrastructure' you can adopt to understand the company's future outcome better. This framework involves identifying how the value factors (volume, price/mix, operating leverage. economies of scale, cost efficiencies, investment efficiencies) affect the value triggers (sales, costs, investments) which in turn affect the expectations of the future of the company. The book then delves into how to implement this process, aided by a series of tailored examples, most notably on Domino's Pizza. The book finishes with how an investor can read corporate signals, including the 'Golden Rule of Share Buybacks', which states that a company should only buy back shares if the price is attractive and there are no better alternatives to deploy capital. The book also mentions how M&A can be particularly destructive on shareholder value, with over 70% of M&A deals destroying value. This emphasises the importance on sound management teams to unlock shareholder value through accretive, rather than dilutive, M&A.