L. J. Rittenhouse - Buffetts Bites: The Essential Investors Guide to Warren Buffetts Shareholder Letters

In turbulent times, Buffetts wisdom and Rittenhouses tips are needed more than ever.

PHILLIPS TALBOT, FORMER AMBASSADOR TO GREECE AND PRESIDENT EMERITUS, ASIA SOCIETY

Thankfully, Mr. Buffetts trust in Rittenhouse lets her share this delightful book with us. I have worked with hundreds of organizations on governance, risk, and compliance initiatives, and he is right: moral courage and principles are essential to business sustainability and growth.

DAVID R. CHILDERS, CIPP, PRESIDENT AND CEO, ETHICSPOINT INC.

Buffetts Bites is a superb distillation of Buffett wisdom. Truly nourishing. L. J. Rittenhouse has done it again!

WILLIAM D. RUTHERFORD, CEO, RUTHERFORD INVESTMENT MANAGEMENT, LLC.

Buffetts Bites reveals the secret of Berkshire Hathaways success: Buffetts disciplined capital allocation, liquidity management, and the work ethics of his managers.

DAWN FARRELL, CHIEF OPERATING OFFICER, TRANSALTA CORP.

L. J. Rittenhouse clearly and concisely shows us how to follow Warren Buffetts honest investment advice. Buffetts Bites is a must read now. It will be a valuable guide for years to come.

JAMES A. SEYERS, DIRECTOR, PORTFOLIO MANAGER, PERSONAL INVESTMENT MANAGEMENT GROUP, SCOTIAMcLEOD

THE ESSENTIAL
INVESTORS GUIDE TO
WARREN BUFFETTS
SHAREHOLDER LETTERS

L.J. RITTENHOUSE

Copyright 2010 by L. J. Rittenhouse. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

ISBN: 978-0-07-174325-9

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The interior shot of shareholders coming down the escalator (page 78) and the exterior shot of the Qwest Center (page 164) are printed with the permission of Jeff Matthews, author of Pilgrimage to Warren Buffetts Omaha (2009), the definitive account of the Berkshire Hathaway shareholder meeting experience.

Frontispiece and head shots of Mr. Buffett on chapter openers Jeff Lonowski.

Head shots of Mr. Buffett on part titles and page 8 photo Getty photos.

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PART I
The ABCs of CEO Shareholder Letters

PART II
Bite-Sized Investor Truths

PART III
Principles-Based Capitalism for the Twenty-First Century

On Saturday, February 28, 2009, tens of thousands of people downloaded Warren Buffetts shareholder letter from the Berkshire Hathaway Web site. They were looking for investing tips. In their hurry to find real, not fools, gold, many missed the best part of the letter: his principles. This is their loss. Following those principles, Buffett had bought Berkshire Hathaway, a struggling textile manufacturer, and turned it into one of the most respected companies in the world.

A lot of pundits didnt seem to get it either. Out of the 12,335 words in Buffetts 2008 letter, they quoted only six: the economy will be in shambles. There was just one problem: The pundits dropped the end of his sentence: but that conclusion does not tell us whether the stock market will rise or fall.

This six-word sound bite from the Oracle of Omaha spread throughout the media and blogosphere like a plague. Markets tumbled. By the close of business on Monday, March 2, 2009, two days after Buffett released his letter, the S&P 500 Index had fallen to its lowest level since 1996. Can we blame the pundits for this market drop? We will never know for certain. Still, why would responsible adults selectively quote a terror-inspiring phrase while the market was in free fall?

What can investors learn from this episode? Simple: Ignore sound bites that rattle markets. It is one of 25 nuggets of wisdomBuffett bitesextracted from his 2008 shareholder letter. Each bite offers a moral for turbulent times. I compare these nuggets of wisdom to chocolates in a box of Sees candy. Both nourish us and give us pleasure; they can startle us, too. Who hasnt bitten into a chocolate candy expecting a caramel inside and found praline nougat instead? So it is with the Buffett bites. To get their full import, we must dig deeply inside.