“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 twenty year period?
Today, let’s look backwards in time to 2001, and take a look at what happened to investors who asked that very question about Vertex Pharmaceuticals, Inc. (NASD: VRTX), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 04/19/2001 |
|
|||
| End date: | 04/16/2021 | ||||
| Start price/share: | $44.70 | ||||
| End price/share: | $219.39 | ||||
| Starting shares: | 223.71 | ||||
| Ending shares: | 223.71 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 390.81% | ||||
| Average annual return: | 8.28% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $49,108.23 | ||||
As we can see, the twenty year investment result worked out well, with an annualized rate of return of 8.28%. This would have turned a $10K investment made 20 years ago into $49,108.23 today (as of 04/16/2021). On a total return basis, that’s a result of 390.81% (something to think about: how might VRTX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“If you’re looking for a home run, a great investment for five years or 10 years or more, then the only way to beat this enormous fog that covers the future is to identify a long-term trend that will give a particular business some sort of edge.” — Ralph Wanger
