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“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


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