“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period?
Today, let’s look backwards in time to 2016, and take a look at what happened to investors who asked that very question about T-Mobile US Inc (NASD: TMUS), by taking a look at the investment outcome over a five year holding period.
| Start date: | 03/11/2016 |
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| End date: | 03/10/2021 | ||||
| Start price/share: | $37.75 | ||||
| End price/share: | $127.41 | ||||
| Starting shares: | 264.90 | ||||
| Ending shares: | 264.90 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 237.51% | ||||
| Average annual return: | 27.54% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $33,746.76 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 27.54%. This would have turned a $10K investment made 5 years ago into $33,746.76 today (as of 03/10/2021). On a total return basis, that’s a result of 237.51% (something to think about: how might TMUS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“Sometimes buying early on the way down looks like being wrong, but it isn’t.” — Seth Klarman
