“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 twenty year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Incyte Corporation (NASD: INCY) back in 2003: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 03/10/2003 |
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| End date: | 03/09/2023 | ||||
| Start price/share: | $3.00 | ||||
| End price/share: | $72.86 | ||||
| Starting shares: | 3,333.33 | ||||
| Ending shares: | 3,333.33 | ||||
| Dividends reinvested/share: | $0.00 | ||||
| Total return: | 2,328.67% | ||||
| Average annual return: | 17.28% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $242,793.90 | ||||
The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 17.28%. This would have turned a $10K investment made 20 years ago into $242,793.90 today (as of 03/09/2023). On a total return basis, that’s a result of 2,328.67% (something to think about: how might INCY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
One more investment quote to leave you with:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett
