“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 Carmax Inc. (NYSE: KMX), by taking a look at the investment outcome over a five year holding period.
| Start date: | 12/16/2014 |
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| End date: | 12/13/2019 | ||||
| Start price/share: | $58.23 | ||||
| End price/share: | $97.88 | ||||
| Starting shares: | 171.73 | ||||
| Ending shares: | 171.73 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 68.09% | ||||
| Average annual return: | 10.96% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,810.66 | ||||
As shown above, the five year investment result worked out quite well, with an annualized rate of return of 10.96%. This would have turned a $10K investment made 5 years ago into $16,810.66 today (as of 12/13/2019). On a total return basis, that’s a result of 68.09% (something to think about: how might KMX 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:
“Cash is a fact, profit is an opinion.” — Alfred Rappaport
