A growth investor’s guide to Blackmores Limited, Premier Investments Limited and Seek Limited 

Credit: Kira

When one looks at the past returns of particularly successful stocks, it can be easy to observe how well they have done over time, and how much wealthier the typical investor might be today if they had simply bought and held.

What hindsight doesn’t show though is how much uncertainty and angst that is felt and experienced by the investor during his or her period of ownership.

Causing much of this angst can be the appearance that the company isn’t achieving by virtue of a stagnant share price.

And that’s assuming that the investment wasn’t already sold in frustration.

It you invest without knowing yourself what long-term is supposed to mean, it would be so easy to sell after you buy into a good business and experience non-existent capital gains after a number of years.

But that would be the wrong thing to do.

Here’s why.

More than ever, it’s important to focus on the company’s fundamentals, ignore the stock price during your period of ownership, and most importantly, really understand what a long-term investment time horizon looks like.

The three businesses I looked at for this article are Blackmores Limited (ASX: BKL)Premier Investments Limited (ASX: PMV) and Seek Limited (ASX: SEK).

As you can see below (inclusive of dividends) these three companies have provided investors with the following returns over a period of ten years to 20 May 2016:

Stock Investor returnpa(%)
BKL 35.33
PMV 22.16
SEK 17.03

Now, I’d like to emphasise that these are per annum returns and, as you can see, they’re pretty good.

What this simple table doesn’t show you though are lengthy periods where the stock price has gone sideways or moderately downwards. The relevant ten-year charts for each of these businesses are below:

Blackmores Limited


Premier Investments Limited


Seek Limited


I’ve drawn a line on each of the charts above to illustrate periods in which the stock’s share price has been flat to negative.

In the first instance with Blackmores, the period is two years, and with Premier Investments and Seek, the periods are six and five years respectively.

Either way, there’s a real possibility that, if you’re an inexperienced investor, you’ll react to share prices rather than the fundamentals of the business and you’ll do yourself a serious injustice if you decide to sell out early simply because the stock ain’t movin.

Taking into consideration the periods highlighted in the charts, the returns to investors holding over these periods look a lot less spectacular:

Stock Period Investor returnpa (%)
BKL 2 Jan 2007 to 6 July 2009 (6.94)
PMV 2 July to 1 July 2013 5.86
SEK 1 July 2007 to 1 July 2012 (0.18)

The figures in the table above show moderately better returns than the share price movements indicated in the charts above, and this is because of the receipt of dividends over these periods. Without dividends, of course, the returns are much worse.

If you’ve chosen what you think are quality businesses, then it’s best to stick to a long-term strategy and not be spooked out of your positions either because of falling share prices, or extended periods of a going-nowhere share price.

Foolish takeaway

More than ever, it’s important to come to the investing table with the right mindset. Most of the spectacular gains of these companies have come in the last three to four years, and if you had sold, you would have done your portfolio a major disservice.

Whatever you do, if you’re going to invest, decide up-front that you’re going to lock your money away for a minimum of five years or longer, and never ever sell shares in response to price movements (or non-movements as the case may be). You also have to realise that capital gains don’t necessarily come easily and may only appear after an extended period of ownership. Eventually, good business performance is all that matters but you’ll need to hang around as a shareholder though to enjoy the benefits.

Discover the 'new breed' of blue chips that could take your portfolio higher in 2016

Forget BHP and Woolworths. These 3 "new breed" top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

The report is free! No credit card required.

Motley Fool contributor Edward Vesely has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.