“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 twenty year 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 ABIOMED, Inc. (NASD: ABMD), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 12/27/1999 |
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| End date: | 12/23/2019 | ||||
| Start price/share: | $19.38 | ||||
| End price/share: | $170.44 | ||||
| Starting shares: | 516.00 | ||||
| Ending shares: | 516.00 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 779.46% | ||||
| Average annual return: | 11.48% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $87,916.12 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 11.48%. This would have turned a $10K investment made 20 years ago into $87,916.12 today (as of 12/23/2019). On a total return basis, that’s a result of 779.46% (something to think about: how might ABMD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“Never is there a better time to buy a stock than when a basically sound company, for whatever reason, temporarily falls out of favor with the investment community.” — Geraldine Weiss
