“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 2016, and take a look at what happened to investors who asked that very question about DexCom Inc (NASD: DXCM), by taking a look at the investment outcome over a five year holding period.
| Start date: | 01/13/2016 |
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| End date: | 01/12/2021 | ||||
| Start price/share: | $71.32 | ||||
| End price/share: | $360.17 | ||||
| Starting shares: | 140.21 | ||||
| Ending shares: | 140.21 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 405.01% | ||||
| Average annual return: | 38.22% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $50,493.98 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 38.22%. This would have turned a $10K investment made 5 years ago into $50,493.98 today (as of 01/12/2021). On a total return basis, that’s a result of 405.01% (something to think about: how might DXCM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Here’s one more great investment quote before you go:
“Buy not on optimism, but on arithmetic.” — Benjamin Graham
