“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 O’Reilly Automotive, Inc. (NASD: ORLY), by taking a look at the investment outcome over a two-decade holding period.
| Start date: | 11/11/1999 |
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| End date: | 11/08/2019 | ||||
| Start price/share: | $11.07 | ||||
| End price/share: | $439.23 | ||||
| Starting shares: | 903.34 | ||||
| Ending shares: | 903.34 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,867.75% | ||||
| Average annual return: | 20.20% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $396,759.36 | ||||
The above analysis shows the two-decade investment result worked out exceptionally well, with an annualized rate of return of 20.20%. This would have turned a $10K investment made 20 years ago into $396,759.36 today (as of 11/08/2019). On a total return basis, that’s a result of 3,867.75% (something to think about: how might ORLY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“While it might seem that anyone can be a value investor, the essential characteristics of this type of investor-patience, discipline, and risk aversion-may well be genetically determined.” — Seth Klarman
