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1.
Warren Buffett, the world's most well-known investor, believes that one must have a high IQ to succeed at investing.
False. Buffett believes that one needs the right temperament and a successful framework, but not a high IQ.
2.
Warren Buffett takes the judgments of the market seriously when he decides whether to invest in a company.
False. Buffett prefers not to evaluate his business on the whims of the market.
3.
A margin of safety is _______.
The difference between a company's estimated fair value and its stock price (where the price is lower than the fair value). Since no intrinsic value calculation is perfect, Buffett requires a satisfactory margin for error before he makes an investment.
4.
All of the following statements about Warren Buffett are false except _______.
Buffett believes that he has never made a good deal with bad people. Though the economics of a business is the most important factor, Buffett believes it's important to work with competent, honest managers. He believes that he has never made a good deal with a bad person.
5.
Companies with sustainable competitive advantages are highly likely to generate _______ with the passage of time.
Higher cash flows. Strength and predictability help.
6.
Warren Buffett avoids technology stocks for all of the following reasons except _______.
Although they offer the highest returns, technology stocks are too volatile. Buffett is not scared of volatility. Rather, he does not invest in companies that are outside his circle of competence, which includes many technology companies.
7.
What does Warren Buffett think that diversification will do to your portfolio?
Lower returns and increase risk. Buffett does not accept the common view of diversification. Rather, he sees it being detrimental in a lot of cases.
