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 members of the S&P 500 have performed compared with the index itself.
Step on up, Brown-Forman (NYSE: BF-B ) .
Brown-Forman shares have simply crushed the S&P 500 over the last three decades:
Source: S&P Capital IQ.
Since 1980, shares have returned an average of 15.9% a year, compared with 11.1% a year for the S&P (both include dividends). A thousand dollars invested in the S&P in 1980 would be worth $29,400 today. In Brown-Forman, it'd be worth $111,200.
Dividends accounted for much of those gains. Compounded since 1980, dividends have made up about half of Brown-Forman's total returns. For the S&P, dividends account for 41.5% of total returns.
Now have a look at how Brown-Forman earnings compare with S&P 500 earnings:
Source: S&P Capital IQ.
That's pretty solid outperformance. Since 1995, earnings per share have grown by an average of 8.4% a year, compared with 6% annual growth for the broader index.
What's that meant for valuations? Not much. Brown-Forman has traded for an average of 20 times earnings since 1980 -- about the same as the 21 times earnings of the broader S&P 500.
Through it all, shares have been strong outperformers over the last three decades. �
Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks Brown-Forman with a four-star rating (out of five). Do you disagree? Leave your thoughts in the comment section below, or add Brown-Forman to My Watchlist.
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