“I buy on the assumption that they could close the market the next day and not reopen it for five 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 five year period?
Today, let’s look backwards in time to 2014, and take a look at what happened to investors who asked that very question about Synopsys Inc (NASD: SNPS), by taking a look at the investment outcome over a five year holding period.
| Start date: | 10/10/2014 |
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| End date: | 10/09/2019 | ||||
| Start price/share: | $37.28 | ||||
| End price/share: | $135.79 | ||||
| Starting shares: | 268.24 | ||||
| Ending shares: | 268.24 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 264.24% | ||||
| Average annual return: | 29.50% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $36,420.75 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 29.50%. This would have turned a $10K investment made 5 years ago into $36,420.75 today (as of 10/09/2019). On a total return basis, that’s a result of 264.24% (something to think about: how might SNPS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions.” — Joel Greenblatt
