“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 O’Reilly Automotive, Inc. (NASD: ORLY) 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: | 09/07/1999 |
|
|||
| End date: | 09/05/2019 | ||||
| Start price/share: | $10.25 | ||||
| End price/share: | $396.58 | ||||
| Starting shares: | 975.61 | ||||
| Ending shares: | 975.61 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,769.07% | ||||
| Average annual return: | 20.05% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $387,164.55 | ||||
The above analysis shows the two-decade investment result worked out exceptionally well, with an annualized rate of return of 20.05%. This would have turned a $10K investment made 20 years ago into $387,164.55 today (as of 09/05/2019). On a total return basis, that’s a result of 3,769.07% (something to think about: how might ORLY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“All intelligent investing is value investing: acquiring more that you are paying for. You must value the business in order to value the stock.” — Charlie Munger
