“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 2018, and take a look at what happened to investors who asked that very question about Ulta Beauty Inc (NASD: ULTA), by taking a look at the investment outcome over a five year holding period.
| Start date: | 09/10/2018 |
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| End date: | 09/07/2023 | ||||
| Start price/share: | $285.96 | ||||
| End price/share: | $416.94 | ||||
| Starting shares: | 34.97 | ||||
| Ending shares: | 34.97 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 45.80% | ||||
| Average annual return: | 7.84% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,578.73 | ||||
As shown above, the five year investment result worked out well, with an annualized rate of return of 7.84%. This would have turned a $10K investment made 5 years ago into $14,578.73 today (as of 09/07/2023). On a total return basis, that’s a result of 45.80% (something to think about: how might ULTA 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:
“Searching for companies is like looking for grubs under rocks: if you turn over 10 rocks you’ll likely find one grub; if you turn over 20 rocks you’ll find two.” — Peter Lynch
