“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 O’Reilly Automotive, Inc. (NASD: ORLY), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 04/05/2001 |
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| End date: | 04/01/2021 | ||||
| Start price/share: | $10.50 | ||||
| End price/share: | $507.82 | ||||
| Starting shares: | 952.38 | ||||
| Ending shares: | 952.38 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 4,736.38% | ||||
| Average annual return: | 21.40% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $483,731.61 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 21.40%. This would have turned a $10K investment made 20 years ago into $483,731.61 today (as of 04/01/2021). On a total return basis, that’s a result of 4,736.38% (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:
“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” — Peter Lynch
