“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 Fiserv Inc (NASD: FISV), by taking a look at the investment outcome over a five year holding period.
Start date: | 11/28/2014 |
|
|||
End date: | 11/26/2019 | ||||
Start price/share: | $35.75 | ||||
End price/share: | $116.22 | ||||
Starting shares: | 279.72 | ||||
Ending shares: | 279.72 | ||||
Dividends reinvested/share: | $0.00 | ||||
Total return: | 225.09% | ||||
Average annual return: | 26.61% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $32,513.17 |
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 26.61%. This would have turned a $10K investment made 5 years ago into $32,513.17 today (as of 11/26/2019). On a total return basis, that’s a result of 225.09% (something to think about: how might FISV shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more piece of investment wisdom to leave you with:
“Markets can remain irrational longer than you can remain solvent.” — John Maynard Keynes