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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a two-decade holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Bristol-Myers Squibb Co. (NASD: CELG) back in 1999. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 11/29/1999


End date: 11/20/2019
Start price/share: $2.41
End price/share: $108.24
Starting shares: 4,149.38
Ending shares: 4,149.38
Dividends reinvested/share: $0.00
Total return: 4,391.29%
Average annual return: 20.97%
Starting investment: $10,000.00
Ending investment: $449,414.99

The above analysis shows the two-decade investment result worked out exceptionally well, with an annualized rate of return of 20.97%. This would have turned a $10K investment made 20 years ago into $449,414.99 today (as of 11/20/2019). On a total return basis, that’s a result of 4,391.29% (something to think about: how might CELG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

One more piece of investment wisdom to leave you with:
“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” — Seth Klarman