By Miranda Marquit - Originally published on PlantingMoneySeeds.com
Learn how corporate communications matter when it comes to making investment decisions with Investing Between the Lines.
“Rittenhouse is still on the side of the angels,” says Warren Buffett. And when Warren Buffett indicates that someone is worth listening to, well, that means that someone is worth listening to.
L.J. Rittenhouse’s latest book, Investing Between the Lines: How to Make Smarter Decisions By Decoding CEO Communications, explores what you can learn from corporate communications. Essentially, it’s about two things:
- How investors can learn to “read between the lines” when it comes to companies by looking at how their executives communicate with the public.
- The importance that companies should place on building trust with the public, and communicating in a way that engenders that trust.
Overall, I found it an interesting and insightful book that moves you along, helping you add a little more to your arsenal when it comes to value investing.
What You Learn By Reading Investing Between the Lines
Rittenhouse has put together a well-written, intuitively-organized handbook for decoding corporate communications in a way that can help you become a better investor. She also makes it a point to address companies themselves, encouraging them to communicate better and to employ best practices.
Some of the most interesting chapters — at least to me — are those that deal with cutting through the sometimes-garbled corporate communications to understand what’s really being said. The very first chapter of the book examines the link between executive communications and performance, and it goes from there.
With Investing Between the Lines you learn about identifying corporate culture and values, and how that can guide you in your quest to find a good investment. Additionally, Rittenhouse lays out a model of sustainable business. If you can find a business that adheres to the model, chances are that you have a long-term winner on your hands.
Throughout the book, Rittenhouse addresses such issues as stakeholder relationships, accountability, candor and accountability crisis (learn how the way a company deals with problems can indicate its possible value as an investment), leadership, vision, strategy, capital stewardship, and more.
Corporate communications can provide you with insight into how a company performs — and how it might not be performing. Rittenhouse shows you how to cut through the nonsense and jargon that might be hiding an awful truth about a company, and how to identify companies that might be a good bet for the long haul. I love her four-part advice toward the end of the book:
- Trust your instincts: No matter what others might say, if you see the emperor is not wearing any clothes, he is naked. If the communication sounds like nonsense, it probably is.
- Read between the lines: Look to see how the CEO balances the company’s profit-making ability with its principles. Look for clarity and consistency in how he or she describes the company’s financial results.
- Kick the tires: If a communication seems credible, it’s important to check out the CEO’s claims in the real world. This will make you a more successful investor.
- Look for a CEO’s authentic and true voice.
If you are into stock picking, this is a great book for you. While I’m not much of a stock picker, and my investing skews toward the boring practice of focusing mainly on index ETFs, I have been slowly building up a dividend portfolio. This book can help me if I decide to move away from the Dividend Aristocrats and do something a little extra.