“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 2001: 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: | 01/11/2001 |
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| End date: | 01/08/2021 | ||||
| Start price/share: | $12.56 | ||||
| End price/share: | $477.92 | ||||
| Starting shares: | 796.18 | ||||
| Ending shares: | 796.18 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,705.10% | ||||
| Average annual return: | 19.95% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $380,572.96 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 19.95%. This would have turned a $10K investment made 20 years ago into $380,572.96 today (as of 01/08/2021). On a total return basis, that’s a result of 3,705.10% (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:
“To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” — Benjamin Graham
