“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 2015, and take a look at what happened to investors who asked that very question about Ansys Inc. (NASD: ANSS), by taking a look at the investment outcome over a five year holding period.
| Start date: | 01/08/2015 |
|
|||
| End date: | 01/07/2020 | ||||
| Start price/share: | $81.66 | ||||
| End price/share: | $256.67 | ||||
| Starting shares: | 122.46 | ||||
| Ending shares: | 122.46 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 214.32% | ||||
| Average annual return: | 25.74% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $31,431.66 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 25.74%. This would have turned a $10K investment made 5 years ago into $31,431.66 today (as of 01/07/2020). On a total return basis, that’s a result of 214.32% (something to think about: how might ANSS shares perform over the next 5 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
