Rating: 
Summary: Should be called "Foundations of Investing"
Review: You can read this book in a number of ways:1. TAKE JUST WHAT YOU NEED. Even though I'm a valuation expert, I thought some chapters of this book stood out as just plain useful. Chapters with great standalone value include: (A) Chapter 8 on Real Options, which develops the only framework for applying real options that I've seen that's intuitive; (B) Chapter 10 on M&A analysis which gives a solid treatment of all deals including often-ignored fixed-value stock deals; and (C) Chapter 5 Appendix on Employee Stock Options which explains how ESOs affect valuation (this is ignored by every other book on valuation). Moreover, I found the tutorials and spreadsheets at the expectationsinvesting.com web site made it easy to apply these ideas without hours of tedious spreadsheet work. Some chapters may be more or less applicable to various readers. For example, investors may find Chapter 11 on incentive compensation to be more applicable to managers. Also, Chapter 4 is most beneficial to those who haven't read the strategy frameworks of Michael Porter, Clayton Christensen of INNOVATOR'S DILEMMA, and Varian/Shapiro of INFORMATION RULES. 2. USE "EI" TO PICK STOCKS. Chapters 5, 6, and 7 lay out the "EI approach" to investing. Namely, the authors suggest that investors use a DCF approach to reverse engineer consensus expectations from a company's current stock price. Then, the authors suggest you compare YOUR expectations to CONSENSUS/MARKET expectations. If you think market expectations are low, buy the stock. If you think market expectations are too high, sell or short the stock. At first glance, it might seem that this material has already been covered in McKinsey's VALUATION or Damodaran's valuation library. But those books don't deal with two things: (A) the importance of the "forecast period" and its relation to strategy and competition, and (B) the importance of figuring out market expectations. Thus, even though I've read those and other books, I learned a lot in this section. 3. TO LEARN HOW TO THINK ABOUT INVESTING. I'd also recommend this book to someone who had a smattering of financial knowledge, but was confused by the contradictory smorgasbord of investing theories out there. Any MBA -- or any determined individual investor who can read a balance sheet -- would find this to be a great foundation book. You could use other more detailed books to fill in the cracks, but this is the best place to start.
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