This story is about a stock.
It is the stock of a large company that was purchased in early February, 2012 for about $20 per share.
The thought behind this purchase was two-fold: first, the company was in a business that is non-cyclical and had shown excellent potential for continued good growth and secondly, the investor calculated that the stock could provide an average annual return in the range of 8 – 10%.
As is often the case, the stock price declined after it was purchased and over the course of the next 6 months or so dropped by several dollars per share. This, of course, called into question the rationale for the original purchase.
There was no information available anywhere (that the investor could find) to indicate why the stock price might have gone down. For this reason, the investor decided that since the purchase was made with a 3 - 5 year time horizon he would take advantage of the decline in price and purchase some additional shares.
During regular intervals, the investor reviewed his investment and with no compelling reason to sell, decided to continue holding this stock. Over the course of the next four years, the stock more than trebled in price.
The stock continued to appreciate in value and after 4 ½ years, the investor finally decided to sell and realize the capital gain.
Why? Because the original objective had been exceeded and the stock had become over-weighted in the portfolio. Selling the stock provided an opportunity to free up some cash to invest in something else with equally excellent prospects.
And so it grows.