“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 Waters Corp. (NYSE: WAT), by taking a look at the investment outcome over a five year holding period.
| Start date: | 05/14/2014 |
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| End date: | 05/13/2019 | ||||
| Start price/share: | $102.14 | ||||
| End price/share: | $209.23 | ||||
| Starting shares: | 97.90 | ||||
| Ending shares: | 97.90 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 104.85% | ||||
| Average annual return: | 15.42% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $20,483.56 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 15.42%. This would have turned a $10K investment made 5 years ago into $20,483.56 today (as of 05/13/2019). On a total return basis, that’s a result of 104.85% (something to think about: how might WAT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” — Seth Klarman
