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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a five year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Generac Holdings Inc (NYSE: GNRC) back in 2017. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 03/28/2017
$10,000

03/28/2017
$83,346

03/25/2022
End date: 03/25/2022
Start price/share: $37.51
End price/share: $312.61
Starting shares: 266.60
Ending shares: 266.60
Dividends reinvested/share: $0.00
Total return: 733.40%
Average annual return: 52.89%
Starting investment: $10,000.00
Ending investment: $83,346.07

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 52.89%. This would have turned a $10K investment made 5 years ago into $83,346.07 today (as of 03/25/2022). On a total return basis, that’s a result of 733.40% (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.]

Another great investment quote to think about:
“Those who do not remember the past are condemned to repeat it.” — George Santayana