“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 WellCare Health Plans Inc (NYSE: WCG), by taking a look at the investment outcome over a five year holding period.
| Start date: | 11/26/2014 |
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| End date: | 11/25/2019 | ||||
| Start price/share: | $74.04 | ||||
| End price/share: | $324.05 | ||||
| Starting shares: | 135.06 | ||||
| Ending shares: | 135.06 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 337.67% | ||||
| Average annual return: | 34.35% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $43,771.19 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 34.35%. This would have turned a $10K investment made 5 years ago into $43,771.19 today (as of 11/25/2019). On a total return basis, that’s a result of 337.67% (something to think about: how might WCG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” — Warren Buffett
