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Stocks 505: Great Investors: Warren Buffett

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1.
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.
2.
How does Warren Buffett determine a company's value?
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He estimates the company's future cash flows and discounts them at an appropriate rate. His method is actually common among investment professionals, and is very accurate.
3.
Warren Buffett avoids technology stocks for all of the following reasons except _______.
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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.
4.
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.
5.
A margin of safety is _______.
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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.
6.
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.
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.