“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 Hologic Inc (NASD: HOLX) back in 1999: 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: | 05/21/1999 |
|
|||
| End date: | 05/20/2019 | ||||
| Start price/share: | $1.91 | ||||
| End price/share: | $44.80 | ||||
| Starting shares: | 5,235.60 | ||||
| Ending shares: | 5,235.60 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 2,245.55% | ||||
| Average annual return: | 17.08% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $234,641.47 | ||||
As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 17.08%. This would have turned a $10K investment made 20 years ago into $234,641.47 today (as of 05/20/2019). On a total return basis, that’s a result of 2,245.55% (something to think about: how might HOLX 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:
“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
