“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 Advanced Micro Devices Inc (NASD: AMD), by taking a look at the investment outcome over a five year holding period.
| Start date: | 10/02/2014 |
|
|||
| End date: | 10/01/2019 | ||||
| Start price/share: | $3.39 | ||||
| End price/share: | $28.76 | ||||
| Starting shares: | 2,949.85 | ||||
| Ending shares: | 2,949.85 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 748.38% | ||||
| Average annual return: | 53.36% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $84,832.15 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 53.36%. This would have turned a $10K investment made 5 years ago into $84,832.15 today (as of 10/01/2019). On a total return basis, that’s a result of 748.38% (something to think about: how might AMD shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
