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Stocks 405: The Fat-Pitch Strategy

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1.
Is it a detriment to fat-pitch investors to hold cash when the market is rising?
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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.
2.
Companies with wide economic moats tend to have _______.
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Long-term staying power. Their competitive advantages help to ensure that they will survive for a long time.
3.
If you are going to succeed at holding a concentrated portfolio of stocks (say, fewer than 20), then you should buy only wide-moat companies.
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True. Companies with wide moats will increase in intrinsic value over time. Therefore, a small portfolio will generally succeed.
4.
When following a fat-pitch strategy, why would you not want to trade very often?
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The odds are that the stock's underlying value will continue increasing. Why sell a stock when it keeps rising year after year?
5.
Buying the stocks of wide-moat companies provides an automatic margin of safety because _______.
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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.