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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Alexion Pharmaceuticals Inc. (NASD: ALXN) back in 2000. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 02/11/2000
$10,000

02/11/2000
$64,347

02/10/2020
End date: 02/10/2020
Start price/share: $15.69
End price/share: $101.01
Starting shares: 637.35
Ending shares: 637.35
Dividends reinvested/share: $0.00
Total return: 543.79%
Average annual return: 9.75%
Starting investment: $10,000.00
Ending investment: $64,347.75

The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 9.75%. This would have turned a $10K investment made 20 years ago into $64,347.75 today (as of 02/10/2020). On a total return basis, that’s a result of 543.79% (something to think about: how might ALXN 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:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger