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Bet on These 5 GARP Stocks to Derive High Yields

Growth at a reasonable price or GARP strategy is ideal for investors looking to enrich their portfolio by investing in stocks that have the potential to provide both value and growth investing. This strategy is best suited for an environment where major benchmarks are witnessing a strong rebound in the latter half of a particular time frame after plunging in the first half.

Investors following a blend strategy seek to invest in both value and growth stocks while those adopting GARP try to find stocks that are undervalued as well as have impressive growth prospects. Thus it may prove to be fruitful to follow the GARP strategy in order to build a profitable portfolio.

GARP: Best of Value & Growth Investing

Though investors following GARP consider popular metrics of both value and growth investing, the ideal range of these metrics are different from what value and growth investing consider. GARP investing employs popular value metrics – price-to-earnings (P/E) and price-to-book value (P/B) ratio – to evaluate whether a stock is undervalued or not.

In case of P/E ratio, investors following the GARP strategy look for a higher value of the ratio compared to value investors. However, they avoid picking companies with extremely high price-to-earnings ratios. On the other hand, like value investors, GARP investors give precedence to low P/B ratios. A ratio less than the industry average is preferred by GARP investors for choosing undervalued stocks.

The other metrics that are borrowed by GARP investors from the growth investing strategy are strong earnings growth history and impressive earnings growth prospects in the coming years. Unlike growth investors, GARP investors look for stocks with a more stable and reasonable growth rate...