“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a twenty year period?
Today, let’s look backwards in time to 1999, and take a look at what happened to investors who asked that very question about ABIOMED, Inc. (NASD: ABMD), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 03/29/1999 |
|
|||
| End date: | 03/28/2019 | ||||
| Start price/share: | $6.19 | ||||
| End price/share: | $283.90 | ||||
| Starting shares: | 1,615.51 | ||||
| Ending shares: | 1,615.51 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 4,486.43% | ||||
| Average annual return: | 21.07% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $458,578.13 | ||||
As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 21.07%. This would have turned a $10K investment made 20 years ago into $458,578.13 today (as of 03/28/2019). On a total return basis, that’s a result of 4,486.43% (something to think about: how might ABMD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.” — William O’Neil
