“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 Laboratory Corporation of America Holdings (NYSE: LH) 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: | 09/10/1999 |
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| End date: | 09/09/2019 | ||||
| Start price/share: | $6.88 | ||||
| End price/share: | $172.48 | ||||
| Starting shares: | 1,453.49 | ||||
| Ending shares: | 1,453.49 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 2,406.98% | ||||
| Average annual return: | 17.47% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $250,787.39 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 17.47%. This would have turned a $10K investment made 20 years ago into $250,787.39 today (as of 09/09/2019). On a total return basis, that’s a result of 2,406.98% (something to think about: how might LH shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“While it might seem that anyone can be a value investor, the essential characteristics of this type of investor-patience, discipline, and risk aversion-may well be genetically determined.” — Seth Klarman
