“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 Alexion Pharmaceuticals Inc. (NASD: ALXN) 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: | 04/17/2000 |
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End date: | 04/15/2020 | ||||
Start price/share: | $10.44 | ||||
End price/share: | $96.94 | ||||
Starting shares: | 957.85 | ||||
Ending shares: | 957.85 | ||||
Dividends reinvested/share: | $0.00 | ||||
Total return: | 828.54% | ||||
Average annual return: | 11.78% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $92,828.13 |
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 11.78%. This would have turned a $10K investment made 20 years ago into $92,828.13 today (as of 04/15/2020). On a total return basis, that’s a result of 828.54% (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:
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” — Benjamin Graham