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Growth At A Reasonable Price - GARP

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What does 'Growth At A Reasonable Price - GARP' mean

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.

BREAKING DOWN 'Growth At A Reasonable Price - GARP'

GARP investing was popularized by legendary Fidelity manager Peter Lynch.
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 subpar to strict value investors who generally
purchase shares at P/Es under broad market multiples.

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Growth investing is an investment style and investment strategy that is focused on the growth of an
investor's capital. Those who follow the growth investing style - growth investors - typically invest in
growth stocks or companies whose earnings are expected to grow at an above-average rate
compared to its industry or the overall market.

BREAKING DOWN 'Growth Investing'

Growth investors often call growth investing a capital growth strategy,
strategy, since investors seek to
maximize their capital gains,
gains, although it is often said that growth investing and value investing are
diametrically opposed.

Influential People in the Growth Investing Field

Peter Lynch pioneered a hybrid of growth and value investing with what is now commonly referred
to as a growth at a reasonable price (GARP) strategy. Another notable name for growth investors is
Thomas Rowe Price, Jr. was coined as the father of growth investing because of his vast work in
growth investing, as reflected by his company, T. Rowe Price. T. Rowe Price is now a public
multinational investment firm. Phil Fisher also created his own name in the growth investing field.
His growth investment style was shared in his 1958 book entitled "Common Stocks and Uncommon
Profits." This book is still one of the most commonly used growth investing book today.

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