U.S. equities began the year 2026 at record highs, with the Dow Jones Industrial Average surpassing 49,000 and the S&P 500 also setting new peaks. While the rally reflects strong earnings expectations and continued momentum in AI-driven growth themes, investor confidence remains tempered by elevated valuations and uncertainty around the Federal Reserve’s policy path. With an unclear rate-cut scenario and inflation above target, markets remain highly sensitive to economic indicators releases and earnings surprises, supporting a “priced-for-perfection” backdrop despite the strong start to the year.

Against this backdrop of record equity levels paired with fragile confidence, traditional defensive investments are proving less reliable. Pure value strategies struggle to keep pace in a market still driven by secular growth narratives, while high-beta growth stocks remain vulnerable to sharp drawdowns amid valuation sensitivity and macro surprises. In such an environment, neither extreme offers consistent downside protection, making a balanced, hybrid approach particularly compelling.

Per the GARP theory, the strategic mingling of growth and value-investing principles gives us a hybrid strategy, offering an ideal investment by utilizing the best features of both. What GARPers look for is whether or not the stocks are somewhat undervalued and have solid, sustainable growth potential (Investopedia).

Several stocks that have surged significantly in recent years have demonstrated the overwhelming success of this hybrid investing strategy over pure-play value and growth investments. Here, we will discuss the success of four such stocks. These are Phibro Animal Health (PAHC Quick QuotePAHC - Free Report) , Commercial Metals (CMC Quick QuoteCMC - Free Report) , Fox (FOX Quick QuoteFOX - Free Report) and Adtalem Global Education Inc. (ATGE Quick QuoteATGE - Free Report) .

A Few More Words on GARP

GARP investing gives priority to one of the popular value metrics, the price/earnings growth (PEG) ratio. Although it is categorized under value investing, this strategy follows the principles of both growth and value investing.

The PEG ratio is defined as (Price/Earnings)/Earnings Growth Rate.

It relates the stocks’ P/E ratios to the future earnings growth rates.

While P/E alone gives an idea of stocks that are trading at a discount, PEG, while adding the growth element to it, helps identify stocks with solid future potential.

A lower PEG ratio, preferably less than 1, is always better for GARP investors.

Say, for example, if a stock's P/E ratio is 10 and the expected long-term growth rate is 15%, the company's PEG will come down to 0.66, a ratio indicating both undervaluation and future growth potential.

Unfortunately, this ratio is often neglected due to investors' limitations in calculating the future earnings growth rate of a stock.

However, there are some drawbacks to using the PEG ratio. It does not consider the very common situation of changing growth rates, such as the forecast of the first three years at a very high growth rate, followed by a sustainable but lower growth rate over the long term.

Hence, PEG-based investing can be even more rewarding if some other relevant parameters are also taken into consideration.

Here are the screening criteria for a winning strategy:

PEG Ratio less than X Industry Median

P/E Ratio (using F1) less than X Industry Median (For more accurate valuation purposes)

Zacks Rank of 1 (Strong Buy) or 2 (Buy) (Whether good market conditions or bad, stocks with a Zacks Rank #1 or #2 have a proven history of success.)

Market Capitalization greater than $1 Billion (This helps us to focus on companies that have strong liquidity.)

Average 20-Day Volume greater than 50,000: A substantial trading volume ensures that the stock is easily tradable.

Percentage Change F1 Earnings Estimate Revisions (4 Weeks) greater than 5%: Upward estimate revisions add to the optimism, suggesting further bullishness.

Value Score of less than or equal to B: Our research shows that stocks with a Value Style Score of A or B, when combined with a Zacks Rank #1, 2 or 3 (Hold), offer the best upside potential.

Our PEG-Driven Picks

Here are four stocks that qualified the screening:

Phibro: Headquartered in New Jersey, Phibro Animal Health is a leading global diversified animal health and mineral nutrition company. The company provides a broad range of products for food animals, including poultry, swine, beef and dairy cattle, and aquaculture. In addition, Phibro manufactures and markets specific ingredients for use in the personal care, automotive, industrial chemical and chemical catalyst industries.

Phibrocan be an impressive GARP investment pick with its Zacks Rank #2, Value Score of A and a Growth score of A. Apart from a discounted PEG and P/E, the stock has an impressive long-term expected growth rate of 12.8%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Commercial Metals: Irving, TX- based Commercial Metals Company manufactures, recycles and markets steel and metal products, related materials and services. It provides these through a network of facilities that include seven electric arc furnace ("EAF") mini mills, two EAF micro mills, a rerolling mill, steel fabrication and processing plants, construction-related product warehouses and metal recycling facilities in the United States and Poland.

CMC stock can also be an impressive GARP investment pick with its Zacks Rank #1, a Value Score of B and a Growth Score of B. Apart from a discounted PEG and P/E, Commercial Metals has a solid long-term expected growth rate of 25.6%.

Fox: It is a U.S. news, sports, and entertainment company operating across Cable Network Programming, Television, Credible, and the FOX Studio Lot. It produces and distributes news, sports, and entertainment content via cable, broadcast and digital platforms, including FOX and Tubi.

FOX stock can be an impressive GARP investment pick with its Zacks Rank #2 and a Value Score of A and a Growth Score of B. Apart from a discounted PEG and P/E, FOX also has an impressive long-term historical growth rate of 12.3%.

Adtalem: The company provides healthcare-focused education in the United States and the Caribbean through its Chamberlain, Walden, and Medical and Veterinary segments. It offers degree, non-degree, and online certificate programs across nursing, health professions, medicine, veterinary studies and related fields.

Adtalem can also be an impressive GARP investment pick with its Zacks Rank #2, a Value Score of A and a Growth Score of A. Apart from a discounted PEG and P/E, the stock also has a solid long-term expected growth rate of 19.6%.