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, HollyFrontier .
HollyFrontier shares have crushed the S&P 500 over the last quarter-century, driven by a big gain over the past decade:
Source: S&P Capital IQ.
Since 1987, shares have returned an average of 18.5% 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 HollyFrontier, it'd be worth $227,400.
Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 60% of HollyFrontier's returns. For the S&P, dividends account for 39% of total returns.
Now have a look at how HollyFrontier earnings compare with S&P 500 earnings:
Source: S&P Capital IQ.
Big outperformance here, too. Since 1995, HollyFrontier's earnings per share have increased by an average of 30% per year, compared with 6% a year for the broader index.
What's that meant for valuations? HollyFrontier has traded for an average of 13 times earnings since 1987 -- below the 24 times earnings for the broader S&P 500.
Through it all, shares have been incredible performers over the past quarter-century.
Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks HollyFrontier with a five-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add HollyFrontier to My Watchlist.
With the swelling of the global middle class, energy consumption will skyrocket over the next few decades, and long-term investors know that you want exposure to this space now. We've picked one incredible natural gas company that presents a rare "double-play" investment opportunity today. We're calling it The One Energy Stock You Must Own Before 2014, and you can uncover it today, totally free, in our premium research report. Click here to read more.
The article Stocks for the Long Run: HollyFrontier vs. the S&P 500 originally appeared on Fool.com.
Fool contributor Morgan Housel and The Motley Fool have no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.