Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
1.
When following a fat-pitch strategy, why would you not want to trade very often?
The odds are that the stock's underlying value will continue increasing. Why sell a stock when it keeps rising year after year?
2.
Is it a detriment to fat-pitch investors to hold cash when the market is rising?
No. It may be difficult to patiently sit on cash when the stock market is rising and you feel as if you're missing out on the fun. However, holding cash is akin to holding an option for when the market provides opportunities to buy at lower prices.
3.
A wide-moat company is typically characterized as having _______.
Long-term structural advantages over its competition. A wide-moat firm typically has a return on capital above its cost of capital. Also, just because a firm has a wide moat, it does not mean its stock price is always cheap. On the contrary, because wide-moat firms are typically very strong and stable, they often trade at premium prices. This is why you should not be afraid to swing away on those rare occasions a fat pitch does come your way.
4.
If you are going to succeed at holding a concentrated portfolio of stocks (say, fewer than 20), then your stocks should be held _______.
At least 3 years. It may take this long (or longer) for the market to recognize the value of a company.
5.
Buying the stocks of wide-moat companies provides an automatic margin of safety because _______.
The companies' stock prices will likely appreciate in value anyway. Given the competitive advantages of wide-moat companies, their stock prices will likely rise, eventually catching up to your fair value estimate of them.
