“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 two-decade period?
Today, let’s look backwards in time to 1999, and take a look at what happened to investors who asked that very question about Laboratory Corporation of America Holdings (NYSE: LH), by taking a look at the investment outcome over a two-decade holding period.
| Start date: | 11/26/1999 |
|
|||
| End date: | 11/22/2019 | ||||
| Start price/share: | $9.22 | ||||
| End price/share: | $169.76 | ||||
| Starting shares: | 1,084.60 | ||||
| Ending shares: | 1,084.60 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 1,741.21% | ||||
| Average annual return: | 15.68% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $184,220.90 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 15.68%. This would have turned a $10K investment made 20 years ago into $184,220.90 today (as of 11/22/2019). On a total return basis, that’s a result of 1,741.21% (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.]
More investment wisdom to ponder:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger
