Stocks for the Long Run: EQT 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, EQT (NYSE: EQT  ) .

EQT shares have outperformed the S&P 500 over the past quarter-century:

Source: S&P Capital IQ.

Since 1987, shares have returned an average of 11.6% 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 EQT, it'd be worth $33,600.

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

Now have a look at how EQT earnings compare with S&P 500 earnings:

Source: S&P Capital IQ.

Good outperformance here, too. Since 1995, EQT's earnings per share have increased by an average of 11.1% per year, compared with 6% a year for the broader index.

What's that meant for valuations? EQT has traded for an average of 24 times earnings since 1987 -- the same as the broader S&P 500.

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 EQT with a three-star rating (out of five). Care to disagree? Leave your thoughts in the comment section below, or add EQT to My Watchlist.

There are many different ways to play the energy sector, and our analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations and is poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out our special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this company before the market does. Click here to access your report -- it's totally free.