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Stocks 505: Great Investors: Warren Buffett

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1.
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.
2.
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.
3.
In investing, 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.
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True. But whether that margin of safety is acceptable is a different issue.
4.
What does Warren Buffett think that diversification will do to your portfolio?
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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.
5.
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.
6.
All of the following statements about Warren Buffett are false except _______.
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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.
7.
To Warren Buffett, a stock is a candidate for purchase if its market price is _______.
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Below the discounted cash-flow calculation of fair value. The ones to buy are those that are in this range.