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," as 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, Danaher
Danaher shares have simply crushed the S&P 500 over the last three decades:
Source: S&P Capital IQ.
Since 1980, shares returned an average of 17.9% a year, compared with 11.1% a year for the S&P (both include dividends). That difference adds up incredibly fast. One thousand dollars invested in the S&P in 1980 would be worth $29,400 today. In Danaher, it'd be worth $195,500.
And have a look at how Danaher's earnings compare with S&P 500 earnings:
Source: S&P Capital IQ.
Again, massive outperformance. Since 1995, Danaher's earnings per share have grown by an average of 16.3% a year, compared with 6% a year for the broader index. Danaher has been one of only a few conglomerates to create significant value piecing businesses together, forming a parent company that's truly a profit machine.
That earnings-growth dynamic has also led to superior valuations. Danaher has traded for an average of 25 times earnings since 1980, compared with 21.3 times for the S&P.
Without a doubt, the company has been an above-average performer historically.
Of course, the important question is whether that can continue. That's where you come in. Our CAPS community currently ranks Danaher with a four-star rating (out of five). Do you disagree? Leave your thoughts in the comment section below, or add Danaher to My Watchlist.
