“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a two-decade holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Varian Medical Systems Inc (NYSE: VAR) back in 1999: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 05/24/1999 |
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| End date: | 05/21/2019 | ||||
| Start price/share: | $4.29 | ||||
| End price/share: | $127.94 | ||||
| Starting shares: | 2,331.00 | ||||
| Ending shares: | 2,331.00 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 2,882.28% | ||||
| Average annual return: | 18.50% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $298,380.85 | ||||
The above analysis shows the two-decade investment result worked out exceptionally well, with an annualized rate of return of 18.50%. This would have turned a $10K investment made 20 years ago into $298,380.85 today (as of 05/21/2019). On a total return basis, that’s a result of 2,882.28% (something to think about: how might VAR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“It’s not always easy to do what’s not popular, but that’s where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognized.” — John Neff
