“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 WellCare Health Plans Inc (NYSE: WCG), by taking a look at the investment outcome over a five year holding period.
| Start date: | 05/16/2014 |
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| End date: | 05/15/2019 | ||||
| Start price/share: | $72.31 | ||||
| End price/share: | $272.85 | ||||
| Starting shares: | 138.29 | ||||
| Ending shares: | 138.29 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 277.33% | ||||
| Average annual return: | 30.42% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $37,732.97 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 30.42%. This would have turned a $10K investment made 5 years ago into $37,732.97 today (as of 05/15/2019). On a total return basis, that’s a result of 277.33% (something to think about: how might WCG 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:
“Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you’re generally better off sticking with what you know. And the third is that sometimes your best investments are the ones you don’t make.” — Donald Trump
