“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
A critical pearl of wisdom from Warren Buffett teaches us that with any potential stock investment we may make, as soon as our buy order is filled we will have a choice: to remain a co-owner of that company for the long haul, or to react to the inevitable short-term ups and downs that the stock market is famous for (sometimes sharp ups and downs).
The reality of this choice forces us to challenge our confidence in any given company we might invest into, and keep our eyes on the long-term time horizon. The market may go up and down the interim, but over a two-decade holding period, will the investment succeed?
Back in 2002, investors may have been asking themselves that very question about Illumina Inc (NASD: ILMN). Let’s examine what would have happened over a two-decade holding period, had you invested in ILMN shares back in 2002 and held on.
| Start date: | 01/07/2002 |
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| End date: | 01/04/2022 | ||||
| Start price/share: | $6.03 | ||||
| End price/share: | $372.36 | ||||
| Starting shares: | 1,658.37 | ||||
| Ending shares: | 1,658.37 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 6,075.12% | ||||
| Average annual return: | 22.89% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $617,762.28 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 22.89%. This would have turned a $10K investment made 20 years ago into $617,762.28 today (as of 01/04/2022). On a total return basis, that’s a result of 6,075.12% (something to think about: how might ILMN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“Cash combined with courage in a time of crisis is priceless.” — Warren Buffett
