“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 AutoZone, Inc. (NYSE: AZO) 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: | 06/01/1999 |
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| End date: | 05/29/2019 | ||||
| Start price/share: | $29.38 | ||||
| End price/share: | $1,027.54 | ||||
| Starting shares: | 340.43 | ||||
| Ending shares: | 340.43 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,398.01% | ||||
| Average annual return: | 19.45% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $350,062.85 | ||||
The above analysis shows the two-decade investment result worked out exceptionally well, with an annualized rate of return of 19.45%. This would have turned a $10K investment made 20 years ago into $350,062.85 today (as of 05/29/2019). On a total return basis, that’s a result of 3,398.01% (something to think about: how might AZO shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” — Howard Marks
