“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Generac Holdings Inc (NYSE: GNRC) back in 2017: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.
| Start date: | 02/10/2017 |
|
|||
| End date: | 02/09/2022 | ||||
| Start price/share: | $42.21 | ||||
| End price/share: | $294.48 | ||||
| Starting shares: | 236.91 | ||||
| Ending shares: | 236.91 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 597.65% | ||||
| Average annual return: | 47.48% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $69,769.51 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 47.48%. This would have turned a $10K investment made 5 years ago into $69,769.51 today (as of 02/09/2022). On a total return basis, that’s a result of 597.65% (something to think about: how might GNRC shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.” — Benjamin Graham
