I was really looking forward to reading Investing Between The Lines. I think it's very important to try to understand management's intentions, and any book that purports to offer some insight in this regard is worth considering. Furthermore, the book was recommended by none other than Warren Buffett in his most recent shareholder letter, making it a no-brainer addition to the reading list. Was I ever disappointed.
The book is basically an ad for a PR agency headed by the book's author. The insights are few and far between.
It's not that I disagreed with the principles offered by Rittenhouse; everything discussed made perfect sense: look for candor, check for specific goals, compare achievements with promises etc. The problem is no link is made between these apparently intuitively selected parameters and success. Which of these matter more than others, if at all? No effort was put towards answering this question.
Even worse, the "quantitative" methods used by Rittenhouse to screen for such principles appear equally as random. Point systems based on the number of times a word (e.g. "cash" or "candor") is referenced in a shareholder letter are actually used to position companies on some sort of shareholder-friendly ranking system. Once again, no attempt is made to link these rankings with results.
If anything, the rankings appear to be backward looking. Pretty much all of Rittenhouse's examples centre on great or failed companies, and examine why letters from years past foreshadowed their current results. This is a common problem in business writing, and for those who don't recognize this daily in the articles/books they read, I highly recommend reading The Halo Effect, one of my favourite books of all time.
I probably should have known better. I read two reviews about Investing Between The Lines from guys that read a lot about this topic (here and here), and they were both extremely negative. You don't often hear lines like "absolutely hated the book" and "the world’s greatest investor got it totally wrong" from guys who admire Buffett about a book he suggested. But I did, and went ahead and wasted time on it anyway.
Don't be the next victim.