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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— 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 twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of O’Reilly Automotive, Inc. (NASD: ORLY) back in 2004. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 04/05/2004


End date: 04/03/2024
Start price/share: $20.72
End price/share: $1,132.95
Starting shares: 482.63
Ending shares: 482.63
Dividends reinvested/share: $0.00
Total return: 5,367.91%
Average annual return: 22.14%
Starting investment: $10,000.00
Ending investment: $546,855.03

The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 22.14%. This would have turned a $10K investment made 20 years ago into $546,855.03 today (as of 04/03/2024). On a total return basis, that’s a result of 5,367.91% (something to think about: how might ORLY 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:
“Behind every stock is a company. Find out what it’s doing.” — Peter Lynch