“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a twenty year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into O’Reilly Automotive, Inc. (NASD: ORLY) back in 2000: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 04/20/2000 |
|
|||
| End date: | 04/17/2020 | ||||
| Start price/share: | $6.38 | ||||
| End price/share: | $373.51 | ||||
| Starting shares: | 1,567.40 | ||||
| Ending shares: | 1,567.40 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 5,754.39% | ||||
| Average annual return: | 22.56% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $585,408.67 | ||||
As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 22.56%. This would have turned a $10K investment made 20 years ago into $585,408.67 today (as of 04/17/2020). On a total return basis, that’s a result of 5,754.39% (something to think about: how might ORLY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.” — William O’Neil
