Financial Insights

When Being Cheap Can Be Good!

As a value manager, our portfolios will typically trade at a discount to the market.  When we seek growth securities, they must be at a reasonable price. This can be comforting to clients who understand that trees don’t grow to the sky.  As of September 7, 2017, the S&P 500® Index P/E ratio as represented by the ETF (SPY) is currently trading at 17.55X forward 12-month earnings expectations.  Time will tell if this multiple is too expensive.  In the meantime, the equities in our private composites are trading at a clear discount.  ACM offers investors a cheaper alternative than locking into the current market multiple.

ACM Private Composite Equity 12 Month Forward P/E vs. S&P 500® Index

S&P 500® Index (SPY):  17.55X

ACM Core Dividend (85% Stock, 15% Fixed):  13.23X

ACM Growth (100% Stock):  15.39X

ACM Income w/Growth (85% Stock, 15% Fixed):  14.26X

ACM Balanced (70% Stock, 30% Fixed):  14.65X

Our investment philosophy is value oriented. We are actively seeking companies that we believe are undervalued relative to the market and have good growth possibilities.  Markets will react to good and bad news, resulting in price movements that many times do not correspond with a company’s long-term fundamentals. The result can be opportunities for our clients to profit by buying when prices are deflated.  At each downturn, we are looking for opportunity.   But this takes patience, since it may take the market some time to realize the value inherent in these companies. Please contact us to find out what makes our portfolios so cheap and how we can make your portfolio cheap too!




P/E calculations as of September 7, 2017, provided by Bloomberg tracking of ACM private composite equity positions.  Individual client account P/E levels will vary.  Lower valuations do not eliminate volatility or guarantee positive returns. Value managers generally invest in stocks that have relatively low valuations (i.e., relatively “cheap”) and are overweight these stocks relative to a portfolio comprised of stocks that have relatively high valuations (i.e., relatively “rich”).  Price-Earnings Ratio- P/E Ratio is a valuation ratio of a company’s current share price compared to its per-share earnings.  Calculated as: Market Value per Share divided by Earnings per Share (EPS). Individual ACM Private Composite fact sheets available upon request.  S&P 500 valuation represented by (SPY) ETF.


The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.


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