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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

This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?

For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2014, investors considering an investment into shares of Copart Inc (NASD: CPRT) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.

Start date: 09/08/2014
$10,000

09/08/2014
$48,073

09/05/2019
End date: 09/05/2019
Start price/share: $16.77
End price/share: $80.61
Starting shares: 596.30
Ending shares: 596.30
Dividends reinvested/share: $0.00
Total return: 380.68%
Average annual return: 36.94%
Starting investment: $10,000.00
Ending investment: $48,073.25

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 36.94%. This would have turned a $10K investment made 5 years ago into $48,073.25 today (as of 09/05/2019). On a total return basis, that’s a result of 380.68% (something to think about: how might CPRT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

More investment wisdom to ponder:
“You can’t be a good value investor without being an independent thinker; you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do.” — Joel Greenblatt