“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 Adobe Inc (NASD: ADBE), by taking a look at the investment outcome over a five year holding period.
| Start date: | 02/05/2015 |
|
|||
| End date: | 02/04/2020 | ||||
| Start price/share: | $73.10 | ||||
| End price/share: | $366.74 | ||||
| Starting shares: | 136.80 | ||||
| Ending shares: | 136.80 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 401.70% | ||||
| Average annual return: | 38.07% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $50,176.07 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 38.07%. This would have turned a $10K investment made 5 years ago into $50,176.07 today (as of 02/04/2020). On a total return basis, that’s a result of 401.70% (something to think about: how might ADBE 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:
“When you sell in desperation, you always sell cheap.” — Peter Lynch
