“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 Netflix Inc (NASD: NFLX), by taking a look at the investment outcome over a five year holding period.
| Start date: | 04/15/2016 |
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| End date: | 04/14/2021 | ||||
| Start price/share: | $111.51 | ||||
| End price/share: | $540.02 | ||||
| Starting shares: | 89.68 | ||||
| Ending shares: | 89.68 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 384.28% | ||||
| Average annual return: | 37.09% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $48,420.46 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 37.09%. This would have turned a $10K investment made 5 years ago into $48,420.46 today (as of 04/14/2021). On a total return basis, that’s a result of 384.28% (something to think about: how might NFLX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” — Peter Lynch
