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Stocks 405: The Fat-Pitch Strategy

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1.
Say you are considering two different companies to invest in. One is very risky and the other has only average risk. Which of the two would require a bigger margin of safety?
Choose wisely. There is only one correct answer.
The very risky one. Given the bigger risk of loss, a bigger margin of safety will do more to protect you.
2.
If you are going to succeed at holding a concentrated portfolio of stocks (say, fewer than 20), then your stocks should be held _______.
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At least 3 years. It may take this long (or longer) for the market to recognize the value of a company.
3.
"Fat pitch" companies normally have _______.
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All of the above. Looking for these characteristics will help you identify fat-pitch opportunities.
4.
Which of the following is not a reason that investors should refrain from trading often?
Choose wisely. There is only one correct answer.
Once a stock is purchased, it should never be sold. Although it's possible that you could purchase a stock that will never need to be sold, there are occasions that investors should sell stocks. The other two answers are both reasons that investors should not trade very often.
5.
According to fat-pitch strategy, the purpose of holding cash instead of being invested in stocks is that you are _______.
Choose wisely. There is only one correct answer.
Waiting for the stock prices of strong companies to drop. According to fat-pitch theory, fat-pitch investments are likely to provide strong growth and absolute returns over time. Thus, you can afford to wait until the prices dip.