ECP | Luxemburg, 04.09.2020
“People calculate too much and think too little”- Charlie Munger (Vice Chair at Berkshire Hathaway).
Our confession – When we look at a stock trading at 182x current year’s normalised earnings, our imagination hits its limits and we end up doing lots of calculations. In order to understand the exuberance around certain IT names, we thought of revisiting the concept of “Expectation Investing”. In a book published by Rappaport and Mauboussin in 2003, the authors suggest that investors should estimate the expectations baked into a company’s stock price, instead of forecasting. Something that James Montier would call “Reverse DCF”.
Mit freundlichen Grüssen aus Luxembourg
Léon Kirch, CIO & Partner
