Stocks for the Long Run: Pall vs. the S&P 500

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Investing isn't easy. Even Warren Buffett counsels that most investors should invest in a low-cost index like the S&P 500. That way, "you'll be buying into a wonderful industry, which in effect is all of American industry," he says.

But there are, of course, companies whose long-term fortunes differ substantially from the index. In this series, we look at how individual stocks have performed against the broad S&P 500.

Step on up, Pall (NYS: PLL) .


Pall shares have matched the S&P 500 over the last quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 9.6% a year, compared with 9.7% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1987 would be worth $19,200 today, and, naturally, about the same in Pall.

Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 41% of Pall's total returns. For the S&P, dividends account for 39% of total returns.

Now have a look at how Pall earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

Average here, too. Since 1995, Pall's earnings per share have grown by an average of 5.9% a year, compared with 6% a year for the broader index.

What's that meant for valuations? Pall has traded for an average of 26 times earnings since 1987 -- just above the 24 times earnings for the broader S&P 500.

Through it all, shares have been average performers over the last quarter-century.

Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks Pall with a two-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add Pall to My Watchlist

The article Stocks for the Long Run: Pall vs. the S&P 500 originally appeared on Fool.com.

Fool contributor Morgan Housel has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. 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.

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