diff --git a/lib/typogruby.rb b/lib/typogruby.rb
index 2f589c7..b703fba 100644
--- a/lib/typogruby.rb
+++ b/lib/typogruby.rb
@@ -160,10 +160,10 @@ def caps(text)
     exclude_sensitive_tags(text) do |t|
       # $1 and $2 are excluded HTML tags, $3 is the part before the caps and $4 is the caps match
       t.gsub(%r{
-          (<[^/][^>]*?>)|                       # Ignore any opening tag, so we don't mess up attribute values
-          (\s|&nbsp;|^|'|"|>|)                  # Make sure our capture is preceded by whitespace or quotes
-          ([A-Z\d](?:[\.'&]?[A-Z\d][\.']?){1,}) # Capture capital words, with optional dots, numbers or ampersands in between
-          (?!\w)                                # ...which must not be followed by a word character.
+          (<[^/][^>]*?>)|                                     # Ignore any opening tag, so we don't mess up attribute values
+          (\s|&nbsp;|^|'|"|>|)                                # Make sure our capture is preceded by whitespace or quotes
+          ([A-Z\d](?:[\.'&]?(?:amp;|#38;)?[A-Z\d][\.']?){1,}) # Capture capital words, with optional dots, numbers or ampersands (&, &amp; or &#38;) in between
+          (?!\w)                                              # ...which must not be followed by a word character.
         }x) do |str|
         tag, before, caps = $1, $2, $3
 
diff --git a/test/test_typogruby.rb b/test/test_typogruby.rb
index 417e8a3..77f4bda 100644
--- a/test/test_typogruby.rb
+++ b/test/test_typogruby.rb
@@ -44,7 +44,9 @@ def test_should_not_break_caps_with_apostrophes
   end
 
   def test_should_not_break_caps_with_ampersands
-    assert_equal '<span class="caps">AT&amp;T</span>', caps("AT&T")
+    assert_equal '<span class="caps">AT&T</span>', caps("AT&T")
+    assert_equal '<span class="caps">AT&amp;T</span>', caps("AT&amp;T")
+    assert_equal '<span class="caps">AT&#38;T</span>', caps("AT&#38;T")
   end
 
   def test_should_replace_quotes