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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, the world's most well-known investor, believes that one must have a high IQ to succeed at investing.
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False. Buffett believes that one needs the right temperament and a successful framework, but not a high IQ.
3.
If a company does not have sustainable competitive advantages over others, then it is easier to estimate the value of its future cash flows.
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False. It is harder, not easier, due to the unpredictability of its business.
4.
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.
5.
Warren Buffett believes that good managers are likely to turn around a bad business.
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False. Buffett does not believe that good managers are likely to turn around a bad business.
6.
Warren Buffett prefers to invest in companies that _______.
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He understands. He sticks to those companies that are within his circle of competence.
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.