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 broader S&P 500.
Step on up, Apache (NYSE: APA ) .
Apache shares have easily outperformed the S&P 500 over the last quarter-century:
Since 1987, shares have returned an average of 14.1% a year, compared with 9.7% a year for the S&P (both include dividends). That difference adds up fast. One thousand dollars invested in the S&P in 1987 would be worth $19,200 today. In Apache, it'd be worth $67,950.
Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up 25% of Apache's total returns. For the S&P, dividends account for 39% of total returns.
Now have a look at how Apache earnings compare with S&P 500 earnings:
That's huge outperformance. Since 1995, earnings per share have increased by an average of 21.1% per year, compared with 6% annual growth for the broader index.
What has that meant for valuations? Apache has traded for an average of 21 times earnings since 1987 -- a bit below the 24-times-earnings average of the S&P 500. It's far different today, however. Apache currently trades at eight times next year's earnings.
Through it all, shares have been strong 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 Apache with a five-star rating (out of five). Do you disagree? Leave your thoughts in the comment section below or add Apache to My Watchlist.