Warren Buffett is known for being a legendary investor. He is known as a proponent of value investing, and for decrying the rampant speculation and gambling by self-proclaimed "investors" .
However, did you know that Warren Buffett used to speculate using derivatives such as stock options and commodity futures?
Warren Buffett purchased his first investment, Cities Services Preferred, at 11 years of age, buying three shares for $114.75. He sold these for a profit of $1.75 relatively soon after the acquisition. His next adventure in the market came in 1949. Buffett started using technical analysis to earn quick profits from the market on top of his other activities. This was mostly speculative trading.
He was hooked on share trading at this time. He tried all sorts of ways to make share trading work, from chart patterns to numerical patterns and 'odd-lot stock trading,' whatever that was. We can tell from this that Buffett had been speculating."
—— Glen Arnold's book, "The Deals of Warren Buffett, Volume 1: The First $100m,"
In the late seventies, he bought a few stocks for his own account. He was a bit more of a swinger with his personal money. For instance, in the case of Teledyne, Buffett invested in options — a strategy with a higher chance of either failing or making a killing. According to one associate, he also bought copper futures — an outright speculation.
—— "Buffett: The Making of an American Capitalist, Chapter 12" by Roger Lowenstein
Technical analysis remains popular among investors. Research indicates up to 40 per cent of foreign exchange traders see technical analysis as important for predicting price action over short time horizons. About one-third of equity fund managers utilise technical analysis, according to a major 2012 survey.
If I were on a desert island and allowed just one investment tool, it would be the chart.”
—— Bolton said
Mooers, what do you think of technical analysis for stock investment?