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Funds 401: Shades of Value

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1.
Given that value fund managers seek to buy stocks for less than they are intrinsically worth, we should expect their funds to have fairly similar earnings patterns.
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False. Value fund managers define value in different ways. That results in strategies that can sometimes have wildly differing performances.
2.
Benchmarks used by relative-value managers include all but which of the following?
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Measures of absolute worth. Such measures are used by absolute-value managers, not relative-value managers.
3.
If a stock is 'fairly valued,' what does that mean?
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The stock is no longer cheap by whatever benchmark the manager uses. The other answers might apply to relative-value managers or absolute-value managers, who would use either relative or absolute benchmarks.
4.
Which statement is true?
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Absolute value funds require patience because management's concentrated style can lead to ups and downs in the short term. Absolute-value managers can calculate a company's worth in a variety of ways. They also tend to have lumpy performance due to their style, and require patience of fund investors.
5.
A stock becomes 'fairly valued' in the eyes of value fund managers when it _______.
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Either of the above. Either of these could be true, depending on the approach for valuation that the manager uses.