GARP

GARP, Growth at a Reasonable Price, is an investment philosophy combining the best of value investing and growth investing. It rejects the false choice between "cheap companies" and "growing companies" and instead seeks companies that can grow sustainably at a reasonable valuation. A pure value strategy risks falling into value traps: companies that look cheap but are cheap for good reason. A pure growth strategy risks paying too much for optimistic growth projections that are never realised. GARP tries to navigate the middle path: quality companies with genuine growth ability, bought when the price is right.

A GARP strategy focuses on companies with strong competitive advantages, high returns on capital and predictable cash flows, but never at any price. In practice, this means the portfolio often holds companies that look more expensive than the average traditional value fund but cheaper than what a pure growth fund accepts. Both criteria must be met. This creates natural periods of underperformance when pure growth strategies surge, and periods of strong relative returns when the market reprices growth stocks.