“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— 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 five year period?
Today, let’s look backwards in time to 2014, and take a look at what happened to investors who asked that very question about AutoZone, Inc. (NYSE: AZO), by taking a look at the investment outcome over a five year holding period.
| Start date: | 04/21/2014 |
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| End date: | 04/17/2019 | ||||
| Start price/share: | $519.40 | ||||
| End price/share: | $1,051.37 | ||||
| Starting shares: | 19.25 | ||||
| Ending shares: | 19.25 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 102.42% | ||||
| Average annual return: | 15.17% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $20,239.17 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 15.17%. This would have turned a $10K investment made 5 years ago into $20,239.17 today (as of 04/17/2019). On a total return basis, that’s a result of 102.42% (something to think about: how might AZO shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“Buy not on optimism, but on arithmetic.” — Benjamin Graham
