Private Equity vs Venture Which Outperforms?

Private equity and venture stocks are two popular investment routes that involve investing in privately owned companies. Private equity typically involves investing in well-established, mature companies in exchange for equity ownership and active management involvement. On the other hand, venture stocks focus on investing in early-stage, high-growth potential startups with the hope of exponential returns. Both options carry risks and potential for high rewards, making them attractive investment choices for investors seeking diversification in their portfolios.

Private Equity or Venture?

When comparing Private Equity and Venture, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between Private Equity and Venture.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. Private Equity has a dividend yield of 1.45%, while Venture has a dividend yield of 4.23%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Private Equity reports a 5-year dividend growth of -12.94% year and a payout ratio of 13.21%. On the other hand, Venture reports a 5-year dividend growth of -1.29% year and a payout ratio of 85.85%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with Private Equity P/E ratio at 9.38 and Venture's P/E ratio at 75.87. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Private Equity P/B ratio is 0.46 while Venture's P/B ratio is 6.76.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Private Equity has seen a 5-year revenue growth of -0.09%, while Venture's is -0.83%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Private Equity's ROE at 4.98% and Venture's ROE at 8.94%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are CHF68.80 for Private Equity and $48.81 for Venture. Over the past year, Private Equity's prices ranged from CHF65.00 to CHF78.00, with a yearly change of 20.00%. Venture's prices fluctuated between $46.59 and $57.63, with a yearly change of 23.70%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.