“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 Red Hat Inc (NYSE: RHT), by taking a look at the investment outcome over a five year holding period.
| Start date: | 05/01/2014 |
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| End date: | 04/30/2019 | ||||
| Start price/share: | $48.75 | ||||
| End price/share: | $182.53 | ||||
| Starting shares: | 205.13 | ||||
| Ending shares: | 205.13 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 274.42% | ||||
| Average annual return: | 30.22% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $37,444.54 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 30.22%. This would have turned a $10K investment made 5 years ago into $37,444.54 today (as of 04/30/2019). On a total return basis, that’s a result of 274.42% (something to think about: how might RHT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“When I was young I thought that money was the most important thing in life; now that I am old I know that it is.” — Oscar Wilde
