“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 two-decade holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into AutoZone, Inc. (NYSE: AZO) back in 2003: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 03/31/2003 |
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| End date: | 03/28/2023 | ||||
| Start price/share: | $68.71 | ||||
| End price/share: | $2,405.22 | ||||
| Starting shares: | 145.54 | ||||
| Ending shares: | 145.54 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 3,400.54% | ||||
| Average annual return: | 19.45% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $349,892.43 | ||||
As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 19.45%. This would have turned a $10K investment made 20 years ago into $349,892.43 today (as of 03/28/2023). On a total return basis, that’s a result of 3,400.54% (something to think about: how might AZO shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Another great investment quote to think about:
“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.” — Bernard Baruch
