Who do you trust with your money? David Kuo of The Motley Fool’s investing show MoneyTalk, challenged LJ Rittenhouse to show how CEO shareholder letters can help investors make smart investing decisions. LJ, who discussed her upcoming book, Investing Between the Lines, made it clear that investors not only had to read shareholder letters, but had to “read between the lines.” For interview transcript click here. To listen to interview click here.
LJ Rittenhouse’s newest book, Investing Between the Lines will be available for purchase in October 2012 (McGraw-Hill). For those who are interested in learning more about LJ’s work, please visit Amazon.com for copies of her previous books, Do Business with People You Can Tru$t and Buffett’s Bites.
“Is Buffett’s Image Tarnished?” CNBCs Squawk on the Street poses this question to L.J. Rittenhouse at the 2011 Berkshire Hathaway Annual Meeting. Watch here.
This weekend, I am attending my 14th Berkshire Hathaway shareholder meeting. Over the years, I’ve watched Berkshire grow from an upstart insurance/investment company to an elephant-sized conglomerate. By now I know the questions that will surface in Buffett’s six-hour Q&A-athon. I also can guess the questions that won’t be asked. Why? They expose the underbelly of American capitalism. Armed with my analysis of Berkshire’s economic principles (Buffett’s Bites, McGraw-Hill 2010), here are three leading candidates: Read More at the CommPro Blog
David Sokol’s departure refocuses attention on Berkshire’s succession horse race. It also underscores a vital fact: at Berkshire, principles trump personalities.
Buffett’s moral standard has always been clear: Never do anything that you would not want your family and friends to see on the front page of the local paper. This principle is reinforced at every Berkshire shareholder meeting with the screening of a 1991 film clip. In it, Buffett testifies before Congress as the Interim Chairman of Salomon Brothers. He wants to win back confidence lost after Salomon’s Treasury auction scandal. Buffett repeats the caution he gave to Salomon employees: Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.
David Sokol appears to have crossed this line and exercised poor judgment regarding Lubrizol. He has stated [and Buffett has affirmed] that he wanted to leave Berkshire in the past, but was persuaded to stay. Now Buffett has accepted Sokol’s resignation. Did Buffett act ruthlessly? No, he acted predictably on principle. Should he have grilled Sokol who told him in “a passing comment” that he owned shares in Lubrizol? Most likely, but Buffett operates on trust. He trusted Mr. Sokol who has contributed immensely to Berkshire’s success.
Sokol’s departure raises an important question about Berkshire’s future. Widely regarded as a leading candidate to become CEO, Sokol had been acting as Berkshire’s Chief Operating Officer, an increasingly important role. Writing in his 2007 shareholder letter, Buffett reminded investors that earnings from non-insurance operating companies, were and would continue to exceed earnings from investments. He wanted to buy companies outright. But operating businesses require special management skills – the kind that Sokol displayed in his rapid turnaround of troubled Net Jets and leadership at Johns-Manville. Buffett’s gracious comments in his press release credit Sokol’s contributions.
The succession question raised by Sokol’s departure is important: who among the leading CEO candidates has the experience and skills to be the insider turnaround guy for businesses in trouble? Anyone in this job is not likely to win popularity contests. Perhaps Berkshire needs a triumvirate management model: a CEO (Chief Capital Allocator and Chief Risk Officer, the principal roles played by Buffett), a Chief Investment Officer and a Chief Operating Officer.
This decision will be made by Berkshire’s board, which not only upholds fiduciary responsibilities to owner-partners, but also stewards Berkshire’s unique trust and principles based culture. The current media frenzy shows how tough a job this is in a Twitter-fed environment where straight talk generates bigger headlines than blatant obfuscation.
Go to HBR.org to find L.J.’s blog on Warren Buffett’s 2010 Shareholder Letter: What to Expect. It was posted today on their Conversation Blog: “a home for inspired insights and observations.” To view the article, click here. Tell us please if you were inspired.
Today, Warren Buffett tapped hedge fund manager Todd Combs to be Berkshire Hathaway’s Chief Investment Officer. How will Todd Combs fit into Berkshire? Tune into NPR‘s On the Money interview last week with L.J. (Laura) Rittenhouse, author of Buffett’s Bites to learn what’s important about the Berkshire culture. Host Steve Pomeranz calls Buffett’s Bites his “favorite new book” and asks L.J. how she got Buffett’s attention: the Omaha oracle posed for the book jacket and signed his photograph inside. Learn the answer to this and other questions like: What is Buffett’s greatest investment tip? Click here.
The Five Top NPR On the Money Interview Questions
1. What is the Warren Buffett investment tip that most investors ignore?
2. How difficult is it to find companies that are trustworthy and transparent?
3. Where can you get a sneak preview of some of the most informative, engaging and candid shareholder letters from 2009?
4. What do most folks miss when they read Warren Buffett’s shareholder letter?
5. What well-known rule makes Berkshire Hathaway one of the most respected companies in the world?