“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 two-decade 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 two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 08/11/2000 |
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| End date: | 08/10/2020 | ||||
| Start price/share: | $7.94 | ||||
| End price/share: | $461.15 | ||||
| Starting shares: | 1,259.45 | ||||
| Ending shares: | 1,259.45 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 5,707.93% | ||||
| Average annual return: | 22.50% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $580,346.87 | ||||
As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 22.50%. This would have turned a $10K investment made 20 years ago into $580,346.87 today (as of 08/10/2020). On a total return basis, that’s a result of 5,707.93% (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.]
Another great investment quote to think about:
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” — Seth Klarman
