“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 AutoZone, Inc. (NYSE: AZO), by taking a look at the investment outcome over a five year holding period.
| Start date: | 06/30/2016 |
|
|||
| End date: | 06/29/2021 | ||||
| Start price/share: | $793.84 | ||||
| End price/share: | $1,491.70 | ||||
| Starting shares: | 12.60 | ||||
| Ending shares: | 12.60 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 87.91% | ||||
| Average annual return: | 13.45% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,794.14 | ||||
As shown above, the five year investment result worked out quite well, with an annualized rate of return of 13.45%. This would have turned a $10K investment made 5 years ago into $18,794.14 today (as of 06/29/2021). On a total return basis, that’s a result of 87.91% (something to think about: how might AZO shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“The most important three words in investing is: “I don’t know.†If someone doesn’t say that to you then they are lying.” — James Altucher
