| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Century Management analyzes the S&P 500's current P/E ratio of 23.46x, which ranks among the highest since 1963, to determine whether markets are overvalued or justified by current conditions. Using an extended P/E formula that decomposes valuation into risk-free rates and equity risk premiums, the analysis reveals an Implied Cost of Equity of 7.4%, placing markets in the upper valuation bands where major market tops have historically occurred at 7-7.5%. While interest rates at 4.73% provide some justification for elevated multiples through lower discount rates, the compressed equity risk premium of 2.66% suggests limited room for further multiple expansion. The firm's framework shows that during periods of declining Implied Cost of Equity, markets perform extraordinarily well, while rising periods produce poor results. With current readings near historic peaks, future returns will depend more on earnings growth execution than valuation expansion, requiring caution given the proximity to historical market top levels.
Market valuations are at historically elevated levels with the S&P 500 P/E of 23.46x and Implied Cost of Equity at 7.4%, placing equities in the upper valuation bands where major market tops have historically occurred.
With the Implied Cost of Equity at historic peak levels near 7.4%, further market upside depends more on earnings growth execution than multiple expansion. Returns will hinge more on earnings than multiple expansion until either long rates ease or the equity risk premium compresses further.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Dec 3 2025 | 2025 Q3 | SPX | earnings, P/E Ratio, rates, risk premium, valuation | - | S&P 500 trades at 23.46x P/E, among the highest since 1963, with Implied Cost of Equity at 7.4% near historical market top levels. Compressed equity risk premium of 2.66% and elevated valuations suggest future returns depend on earnings growth rather than multiple expansion, warranting caution at current levels. |
| Nov 19 2025 | 2025 Q2 | ACAD.ST, ALLFG.L, AOF.DE, BFSA.MC, CELL.MI, DFS.L, DOM.L, EXRO, HEAD.L, INCH.L, MIDW.L, MON.MI, NOEJ.DE, OIE.L, PSG.MC, RHIM.L, RITN.SW, SESA.MI, STAB.DE, TGS.OL, TTK.DE | discount, Europe, Patience, Quality, small caps, value |
DPZ.L RIEN.SW |
EQUAM Global Value declined 3.9% in Q3 due to zero bank exposure and European small-cap focus, but maintains 112% upside potential at historical highs. Portfolio of 45 quality companies trades at attractive multiples with low debt levels. Manager views current market valuations as extraordinarily demanding while positioning fund as best alternative for capital protection amid multiple macro risks. |
| Mar 5 2025 | 2025 Q1 | - | AI, energy, fiscal policy, gold, inflation, Natural Gas, technology, Trade Policy | - | Century Management sees compelling opportunities in historically undervalued energy, AI-driven productivity, and inflation hedges while navigating massive government debt refinancing risks. They favor quality companies with pricing power, maintain gold as systemic protection, and believe current energy valuations relative to equities mirror past inflection points that preceded significant sector outperformance cycles. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q3 |
ValuationThe S&P 500 P/E ratio of 23.46x ranks among the highest since 1963, with the Implied Cost of Equity at 7.4% placing markets in the upper valuation bands. Further upside depends more on earnings growth than multiple expansion unless long rates ease or risk premiums compress. |
P/E Ratio Earnings Yield Valuation Metrics Market Multiples Fair Value |
RatesInterest rates directly correlate to P/E multiples through the cost of equity, with the current 30-year rate near 4.73%. The relationship between bond yields and earnings yields shows high correlation with R2 of 43%, anchoring equity valuation to rate movements. |
Interest Rates Bond Yields Cost of Equity Monetary Policy Rate Environment | |
Risk AppetiteThe equity risk premium currently sits at 2.66%, relatively low compared to historical ranges of 5-9% during 2010-2021. This compressed risk premium reflects increased investor confidence in earnings stability despite elevated market valuations. |
Equity Risk Premium Risk Premium Market Risk Investor Sentiment Risk Tolerance | |
| 2025 Q2 |
ValueFund invests in companies trading at significant discounts to intrinsic value with upside potential of 112%. Portfolio comprises 45 companies trading at attractive multiples with high-quality businesses and low debt levels. Manager emphasizes patience and long-term investment in sound businesses at excellent prices. |
Discount Intrinsic Value Multiples Quality Patience |
Small CapsFund focuses on European small and medium-sized companies, a market sector that has been abandoned by investors. Currently generating idea generation efforts in the European Small & Mid Cap arena. Performance negatively affected by exposure to this underperforming segment. |
European SMID Abandoned Underperforming Opportunity | |
| 2025 Q1 |
InflationInflation remains persistently above the Federal Reserve's 2% target with structural and cyclical factors driving it higher including tight labor markets, rising government debt interest costs, and energy price volatility. The cumulative effects show price levels have shifted significantly higher over the past decade. |
Inflation Federal Reserve Labor Markets Energy Prices Government Debt |
OilOil prices have averaged approximately $77 per barrel over the past 12 months, with the manager believing fair value is between $70-$85 per barrel. Global demand growth, years of underinvestment in new supplies, and geopolitical uncertainties support a tighter market and potential price appreciation. |
Oil WTI Crude OPEC Energy Demand Geopolitical | |
Natural GasNatural gas is increasingly recognized as the key bridge fuel in the energy transition, offering a cleaner alternative to coal while stabilizing renewable energy sources. Global LNG demand is accelerating, particularly in Europe and Asia, with the U.S. positioned as a dominant energy supplier for decades. |
Natural Gas LNG Energy Transition Bridge Fuel Export Capacity | |
GoldGold remains a core position as a strategic hedge against inflation, currency debasement, and financial instability. The manager is primarily allocated to physical bullion, which they believe offers the most direct and effective protection against systemic risks and market volatility. |
Gold Physical Bullion Inflation Hedge Currency Debasement Systemic Risk | |
AIAI is transforming industries by enhancing productivity and efficiency, lowering costs through automation, optimizing supply chains, and improving decision-making through data analytics. The manager sees opportunities in automation, AI software, and semiconductor firms driving next-generation efficiency and productivity. |
AI Automation Productivity Semiconductors Machine Learning | |
Trade PolicyThe new administration's tariff policies are viewed as potentially expansionary for the U.S. economy, unlike the 1930s when the U.S. was the world's largest exporter. Today's tariffs could increase employment and wages by reducing domestic consumption and forcing up domestic savings rates in a high-consumption economy. |
Tariffs Trade Policy Domestic Manufacturing Employment Economic Policy |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Sep 30, 2025 | Fund Letters | Century Management | DPZ.L | Domino's Pizza Group PLC | Consumer Discretionary | Restaurants | Bull | London Stock Exchange | asset-light, franchise expansion, free cash flow yield, market share, Master Franchisee, Pizza Delivery, UK Consumer | Login |
| Sep 30, 2025 | Fund Letters | Century Management | RIEN.SW | Rieter Holding AG | Industrials | Industrial Machinery | Bull | SIX Swiss Exchange | acquisition, arbitrage, Artificial Fiber, Capital Increase, EBITDA multiple, leverage, Textile Machinery | Login |
| TICKER | COMMENTARY |
|---|---|
| SPX | As of September 30, 2025, the S&P 500 index (SPX) price was 6688, with estimated 12 months forward earnings per share of $285, equating to a P/E of 23.46x. Looking at Figure 1, this S&P 500 P/E ratio ranks among the highest dating back to 1963. As of 9-30-2025, with the S&P 500 at 6,688, forward EPS of $285, and a 30-year interest rate near 4.73%, the extended P/E equation implies an equity risk premium of ~2.66% and an Implied Cost of Equity around 7.4%. We again find the S&P 500 Index in the upper valuation bands. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||
