Warren Buffett has been outspoken on using technical analysis and has published numerous reports about technical analysis. However, he does not do so for his investing strategy, although he has talked to others who do. His use of technical analysis seems to be somewhat unique, however. Warren Buffett’s main areas of investment involve dividend investing and real estate investing which are investments where the long-term return is important. He is a big believer in the fundamental valuation principle of comparing apples to oranges and comparing the companies he invests in to those of others in the same class.
Warren Buffett’s investment portfolio for 2015 consisted of 1,001 stock holdings in 1,009 companies with an average dividend yield of 2.07% and 10,700 active options held during the period. This portfolio had an expense ratio of approximately 2.50%. During the last year, Warren Buffett’s total net assets exceeded $4.9 billion and he gave away almost 0.5% of it. His net worth was $31.7 billion as of December 31, 2013.
Technical analysis is a form of analyzing a range of economic data to determine fundamental factors that affect a company’s chances of success. Using this form of analysis would usually involve a review of the company’s sales figures to determine potential opportunities for expansion in its business. There may also be questions posed by technical analysts over whether a company’s financials conform with its economic goals.
Warren Buffett’s analysis of potential expansion in his Berkshire Hathaway (NYSE:BRK-A) funds used a technical analysis methodology called momentum analysis. Momentum analysis requires a careful assessment of the current direction of a stock’s share price. The momentum of the share price, which can be measured using the moving averages, indicates the direction of future company results and the level of confidence a company has in its ability to grow. Using these methods, Warren Buffett estimated potential growth and realized operating profits for the period from 1995-2012.
Although technical analysis is not Warren Buffett’s main area of investment and does not make up his full portfolio, it is possible that he uses technical analysis as part of his portfolio’s investment strategy. His holdings in companies that specialize in energy and utilities are interesting. Warren Buffett has used his investment strategy against a company called Liberty Global Services (NASDAQ:LOGV) in the past, as he is looking for energy companies that have a high potential for profits in the future.
To gain further insight on the technical analysis process and the benefits of technical analysis, I highly
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