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Portfolio > Alternative Investments > Private Equity

Behind the Numbers, with Gail Dudack

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The Principal of the Dudack Research Group believes that equities are presently the best valued asset. “Supporting this view is the fact that the trailing earnings yield (2006 earnings) on equities is 6.1%. Add to this a dividend yield of 1.65% and equities have a total return of 7.75%,” she explains. “This compares very well to bonds at 4.7%, cash at 5.25%, or real estate which is likely to be flat for several years.” Dudack says to keep in mind that this perspective on valuation includes no earnings growth in 2007. “With modest earnings growth in 2007 the equity earnings yield is 6.5% for a total return of 8.2%.” Dudack is interested in U.S. stocks. “Asian and emerging markets have earnings expectations that are twice that of the U.S.,” she says, “but these forecasts are also a source of risk since any slowdown in earnings would be a problem.”