“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 two-decade period?
Today, let’s look backwards in time to 1999, and take a look at what happened to investors who asked that very question about NVR Inc. (NYSE: NVR), by taking a look at the investment outcome over a two-decade holding period.
| Start date: | 10/25/1999 |
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| End date: | 10/23/2019 | ||||
| Start price/share: | $42.75 | ||||
| End price/share: | $3,775.06 | ||||
| Starting shares: | 233.92 | ||||
| Ending shares: | 233.92 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 8,730.55% | ||||
| Average annual return: | 25.10% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $882,969.23 | ||||
As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 25.10%. This would have turned a $10K investment made 20 years ago into $882,969.23 today (as of 10/23/2019). On a total return basis, that’s a result of 8,730.55% (something to think about: how might NVR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
More investment wisdom to ponder:
“Your success in investing will depend in part on your character and guts and in part on your ability to realize, at the height of ebullience and the depth of despair alike, that this too, shall pass.” — Jack Bogle
