Choose wisely. There is only one correct answer to each question.
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1.
"Fat pitch" companies normally have _______.
All of the above. Looking for these characteristics will help you identify fat-pitch opportunities.
2.
According to fat-pitch strategy, the purpose of holding cash instead of being invested in stocks is that you are _______.
Waiting for the stock prices of strong companies to drop. According to fat-pitch theory, fat-pitch investments are likely to provide strong growth and absolute returns over time. Thus, you can afford to wait until the prices dip.
3.
Which of the following is not a reason that investors should refrain from trading often?
Once a stock is purchased, it should never be sold. Although it's possible that you could purchase a stock that will never need to be sold, there are occasions that investors should sell stocks. The other two answers are both reasons that investors should not trade very often.
4.
If you are going to succeed at holding a concentrated portfolio of stocks (say, fewer than 20), then you should buy only wide-moat companies.
True. Companies with wide moats will increase in intrinsic value over time. Therefore, a small portfolio will generally succeed.
5.
The fat-pitch approach to stock investing is best described as _______.
Buying above-average companies at below-average prices. The fat-pitch approach is best described as buying above-average (wide-moat) companies at prices that provide a margin of safety to your fair value estimate.
