The Board According to GARP
Board Rules: NYSE, AMEX or NASDAQ listed stocks only here. No OTC or pink sheet securities will be entertained. When posting a potential GARPer, please include the reasonable price at the time of the post and a chart if possible. Any further DD is also welcomed. GARP parameters can be loosely defined and scans can be inclusive or exclusive of different factors to further tweak the GARP strategy.(ie. market cap, float, volume,sector, etc)
Growth At A Reasonable Price - GARP
An equity investment strategy that seeks to combine tenets of both growth investing and value investing to find individual stocks. GARP investors look for companies that are showing consistent earnings growth above broad market levels (a tenet of growth investing ) while excluding companies that have very high valuations (value investing). The overarching goal is to avoid the extremes of either growth or value investing; this typically leads GARP investors to growth-oriented stocks with relatively low price/earnings (P/E) multiples in normal market conditions.
GARP investing was popularized by legendary Fidelity manager Peter Lynch. While the style may not have rigid boundaries for including or excluding stocks, a fundamental metric that serves as a solid benchmark is the price/earnings growth (PEG) ratio. The PEG shows the ratio between a company's P/E ratio (valuation) and its expected earnings growth rate over the next several years. A GARP investor would seek out stocks that have a PEG of 1 or less, which shows that P/E ratios are in line with expected earnings growth. This helps to uncover stocks that are trading at reasonable prices.
In a bear market or other downturn in stocks, one could expect the returns of GARP investors to be higher than those of pure growth investors, but sub par to strict value investors who generally purchase shares at P/Es under broad market multiples.
Do your own due dilligence. I am not making buy or sell recomendations nor am I making timing calls. Never buy or sell securities based on non-professional advice from the polka community.