“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 2017, and take a look at what happened to investors who asked that very question about Netflix Inc (NASD: NFLX), by taking a look at the investment outcome over a five year holding period.
| Start date: | 04/27/2017 |
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| End date: | 04/26/2022 | ||||
| Start price/share: | $153.08 | ||||
| End price/share: | $198.40 | ||||
| Starting shares: | 65.33 | ||||
| Ending shares: | 65.33 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 29.61% | ||||
| Average annual return: | 5.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,958.49 | ||||
As shown above, the five year investment result worked out well, with an annualized rate of return of 5.32%. This would have turned a $10K investment made 5 years ago into $12,958.49 today (as of 04/26/2022). On a total return basis, that’s a result of 29.61% (something to think about: how might NFLX 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:
“Never is there a better time to buy a stock than when a basically sound company, for whatever reason, temporarily falls out of favor with the investment community.” — Geraldine Weiss
