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Stocks 505: Great Investors: Warren Buffett

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1.
Warren Buffett rejects the idea that diversification is helpful to informed investors.
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True. He actually thinks it is likely to lower your returns and increase risk.
2.
Warren Buffett determines a company's value by estimating the company's future _______ and discounting them at an appropriate rate.
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Cash flows. Buffett, like many good investors, estimates the future cash flows and then discounts them so they are expressed in today's dollars.
3.
Warren Buffett has written that he _______ when he misses out on big returns in areas he doesn't understand.
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Isn't bothered. Rather, he sticks to what he knows, despite new trends.
4.
Warren Buffett believes that he has never made a good deal with bad people.
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True. Though the economics of a business is the most important factor, Buffett believes it's important to work with competent, honest managers.
5.
To Warren Buffett, anytime a stock is selling for less than its fair value, it therefore has an acceptable margin of safety.
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False. Not just any discount is acceptable. It must be substantial and satisfactory to him.
6.
Companies with sustainable competitive advantages are highly likely to generate _______ with the passage of time.
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Higher cash flows. Strength and predictability help.
7.
Warren Buffett takes the judgments of the market seriously when he decides whether to invest in a company.
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False. Buffett prefers not to evaluate his business on the whims of the market.