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, HCP (NYSE: HCP ) .
HCP shares have easily outperformed the S&P 500 over the past quarter-century, with most of the outperformance occurring in the past decade:
Since 1987, shares have returned an average of 15.6% 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 HCP, it'd be worth $102,400.
Dividends accounted for a lot of those gains. Compounded since 1987, dividends have made up about 87% of HCP's total returns. For the S&P, dividends account for 39% of total returns.
Now have a look at how HCP earnings compare with S&P 500 earnings:
Some underperformance here. Since 1995, HCP earnings per share have increased by an average of 3.6% a year, compared with 6% a year for the broader index.
What's that meant for valuations? HCP has traded for an average of 37 times earnings since 1987 -- well above the 24 times earnings of the broader S&P 500. It's far different today, however. HCP currently trades for about 16 times next year's expected earnings.
Through it all, shares have been strong 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 HCP with a three-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add HCP to My Watchlist.