Stocks for the Long Run: Old Republic International 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 individual stocks have performed against the broad S&P 500.

Step on up, Old Republic International (NYS: ORI) .

Old Republic International shares have slightly underperformed the S&P 500 over the last quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 9.5% 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. In Old Republic International, it'd be worth $18,300.

Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 67% of Old Republic International's returns. For the S&P, dividends account for 39% of total returns.

Now have a look at how Old Republic International earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

Deep underperformance here. Since 1995, Old Republic International's earnings per share have declined, compared with 6% a year growth for the broader index.

What's that meant for valuations? Old Republic International has traded for an average of 16 times earnings since 1987 -- below the 24 times earnings for the broader S&P 500.

Through it all, shares have been slight disappointments 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 Old Republic International with a three-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add Old Republic International to My Watchlist.

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

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