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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— 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 five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into O’Reilly Automotive, Inc. (NASD: ORLY) back in 2014: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 08/19/2014
$10,000

08/19/2014
$24,796

08/16/2019
End date: 08/16/2019
Start price/share: $153.91
End price/share: $381.64
Starting shares: 64.97
Ending shares: 64.97
Dividends reinvested/share: $0.00
Total return: 147.96%
Average annual return: 19.94%
Starting investment: $10,000.00
Ending investment: $24,796.34

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 19.94%. This would have turned a $10K investment made 5 years ago into $24,796.34 today (as of 08/16/2019). On a total return basis, that’s a result of 147.96% (something to think about: how might ORLY shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

More investment wisdom to ponder:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger