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How to Find Attractively Priced Growth Stocks

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Growth at a Reasonable Price or GARP is an investment strategy that focuses on stocks with strong growth potential trading at attractive prices. It seeks to combine the best aspects of both growth investing and value investing.

GARP strategy was popularized by Peter Lynch, the legendary manager of the Fidelity Magellan Fund from 1977 to 1990. Under his management, the Magellan Fund delivered an average annual return of 29% over 13 years.

Definitions of GARP stocks can vary, but stocks are generally selected using a combination of earnings growth and valuation metrics. This difference in definitions has resulted in significant differences in the performance of two GARP strategy ETFs.

The iShares MSCI USA Quality Factor ETF (GARP - Free Report) selects 135 stocks exhibiting favorable value and quality characteristics. The selection process begins with the MSCI USA Index. NVIDIA (NVDA - Free Report) , Microsoft (MSFT - Free Report) , and Apple (AAPL - Free Report) are currently its top holdings, while the Information Technology sector accounts for about 47% of the portfolio.

The Invesco S&P 500 GARP ETF (SPGP - Free Report) selects 75 securities in the S&P 500 Index that have the highest “growth scores” and “quality and value composite scores.” NVIDIA, Super Micro Computer (SMCI - Free Report) , and Uber Technologies (UBER - Free Report) are its top holdings.

To learn more about these ETFs, please watch the short video above.

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