“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 twenty year period?
Today, let’s look backwards in time to 1999, and take a look at what happened to investors who asked that very question about ABIOMED, Inc. (NASD: ABMD), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 05/10/1999 |
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| End date: | 05/08/2019 | ||||
| Start price/share: | $7.88 | ||||
| End price/share: | $260.27 | ||||
| Starting shares: | 1,269.04 | ||||
| Ending shares: | 1,269.04 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,202.92% | ||||
| Average annual return: | 19.10% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $330,262.42 | ||||
The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 19.10%. This would have turned a $10K investment made 20 years ago into $330,262.42 today (as of 05/08/2019). On a total return basis, that’s a result of 3,202.92% (something to think about: how might ABMD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
