“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 twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Hologic Inc (NASD: HOLX) 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: | 11/22/1999 |
|
|||
| End date: | 11/19/2019 | ||||
| Start price/share: | $1.19 | ||||
| End price/share: | $47.15 | ||||
| Starting shares: | 8,403.36 | ||||
| Ending shares: | 8,403.36 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,862.18% | ||||
| Average annual return: | 20.19% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $396,099.54 | ||||
The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 20.19%. This would have turned a $10K investment made 20 years ago into $396,099.54 today (as of 11/19/2019). On a total return basis, that’s a result of 3,862.18% (something to think about: how might HOLX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros
