“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 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 decade-long period?
Today, let’s look backwards in time to 2009, and take a look at what happened to investors who asked that very question about Vertex Pharmaceuticals, Inc. (NASD: VRTX), by taking a look at the investment outcome over a decade-long holding period.
| Start date: | 09/21/2009 |
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| End date: | 09/18/2019 | ||||
| Start price/share: | $38.11 | ||||
| End price/share: | $174.52 | ||||
| Starting shares: | 262.40 | ||||
| Ending shares: | 262.40 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 357.94% | ||||
| Average annual return: | 16.44% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $45,797.40 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 16.44%. This would have turned a $10K investment made 10 years ago into $45,797.40 today (as of 09/18/2019). On a total return basis, that’s a result of 357.94% (something to think about: how might VRTX shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“The function of economic forecasting is to make astrology look respectable.” — John Galbraith
