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

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 members of the S&P 500 have performed compared with the index itself.

Step on up, Corning (NYS: GLW) .

Corning shares have underperformed the S&P 500 over the last three decades. By quite a bit, too (the dot-com bubble notwithstanding):

Source: S&P Capital IQ.

Since 1980, shares returned an average of 7.8% a year, compared with 11.1% a year for the S&P (both include dividends). One thousand dollars invested in the S&P in 1980 would be worth $29,400 today. In Corning, it'd be worth just $10,900.

Dividends accounted for a lot of those gains. Compounded since 1980, dividends have made up about half of Corning's total returns. For the S&P, dividends account for 41.5% of total returns.

Now have a look at how Corning earnings compared with S&P 500 earnings:

Source: S&P Capital IQ.

Pretty average. Since 1995, earnings per share have grown by an average of 6.6% a year, compared with 6% a year for the broader index.

What's it all meant for valuations? Corning has traded for an average of 35 times earnings since 1980 -- markedly above 21 times earnings for the broader S&P 500. It's far different today, however. Shares currently trade for around nine times earnings.

Through it all, shares have been disappointments over the last three decades.

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

At the time thisarticle was published Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. The Motley Fool owns shares of Corning. Motley Fool newsletter services have recommended buying shares of Corning. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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