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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of O’Reilly Automotive, Inc. (NASD: ORLY) back in 1999. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 04/05/1999
$10,000

04/05/1999
$336,581

04/04/2019
End date: 04/04/2019
Start price/share: $11.82
End price/share: $398.08
Starting shares: 846.02
Ending shares: 846.02
Dividends reinvested/share: $0.00
Total return: 3,267.85%
Average annual return: 19.21%
Starting investment: $10,000.00
Ending investment: $336,581.36

As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 19.21%. This would have turned a $10K investment made 20 years ago into $336,581.36 today (as of 04/04/2019). On a total return basis, that’s a result of 3,267.85% (something to think about: how might ORLY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Here’s one more great investment quote before you go:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” — Warren Buffett