Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

American Capital Ltd. (ACAS), American Capital Agency Corp. (AGNC): Meet The Cash Cows

A comparable-company analysis also finds the valuation placed on the asset manager to be reasonable. T. Rowe Price Group, Inc. (NASDAQ:TROW) manages some $86.8 billion in assets under management, earning an enterprise value of $15 billion from Wall Street. Thus, it trades at an EV/AUM ratio of 0.17. American Capital Asset Management, which requires very little capital from its owner, is valued at an EV/AUM ratio of 0.064.

The Foolish bottom line
As a standalone investment company, American Capital Asset Management, which is worth roughly 19% of all assets in the American Capital Ltd. (NASDAQ:ACAS) portfolio, is a very valuable asset manager. Not only does it require minimal investments, but its earnings power is also cemented with management agreements that allow for consistent fee income, even if its funds deteriorate in value. If its mortgage REITs eventually trade above book value, it could raise new funds and grow fee-earning assets, providing additional upside.

This could be a subsidiary to watch if American Capital Ltd. (NASDAQ:ACAS) follows through with plans to spin off its debt and equity assets into new publicly traded companies. As a pure play, it would be a very attractive investment company that could potentially pay out big dividends to shareholders.

American Capital Ltd. (NASDAQ:ACAS) recently filed with the SEC for a new business development company named “AC Debt,” which could be the vehicle through which American Capital separates its debt portfolio from its equity investments including American Capital Asset Management. If given the opportunity to own the asset manager by itself, I’d be a buyer at the IPO.

The article This Stock Makes a Killing With Other People’s Money originally appeared on

Fool contributor Jordan Wathen and The Motley Fool have no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.