“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
A critical pearl of wisdom from Warren Buffett teaches us that with any potential stock investment we may make, as soon as our buy order is filled we will have a choice: to remain a co-owner of that company for the long haul, or to react to the inevitable short-term ups and downs that the stock market is famous for (sometimes sharp ups and downs).
The reality of this choice forces us to challenge our confidence in any given company we might invest into, and keep our eyes on the long-term time horizon. The market may go up and down the interim, but over a twenty year holding period, will the investment succeed?
Back in 2000, investors may have been asking themselves that very question about Waters Corp. (NYSE: WAT). Let’s examine what would have happened over a twenty year holding period, had you invested in WAT shares back in 2000 and held on.
| Start date: | 01/03/2000 |
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| End date: | 12/31/2019 | ||||
| Start price/share: | $25.75 | ||||
| End price/share: | $233.65 | ||||
| Starting shares: | 388.35 | ||||
| Ending shares: | 388.35 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 807.38% | ||||
| Average annual return: | 11.65% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $90,664.40 | ||||
As we can see, the twenty year investment result worked out quite well, with an annualized rate of return of 11.65%. This would have turned a $10K investment made 20 years ago into $90,664.40 today (as of 12/31/2019). On a total return basis, that’s a result of 807.38% (something to think about: how might WAT shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
