4 Best GARP Stocks With Discounted PEG to Buy

Core Viewpoint - The article discusses the effectiveness of the GARP (Growth at a Reasonable Price) investment strategy, highlighting its advantages over pure value or growth investing, particularly in uncertain market conditions [1][2]. GARP Investment Strategy - GARP combines principles of both growth and value investing, focusing on stocks that are undervalued yet have sustainable growth potential [3]. - The strategy prioritizes the PEG (Price/Earnings Growth) ratio, which relates a stock's P/E ratio to its future earnings growth rate, helping to identify stocks with solid future potential [4]. PEG Ratio Insights - The PEG ratio is calculated as (Price/Earnings)/Earnings Growth Rate, with a lower PEG ratio (preferably less than 1) being favorable for GARP investors [4][5]. - An example illustrates that a stock with a P/E ratio of 10 and a long-term growth rate of 15% results in a PEG of 0.66, indicating both undervaluation and growth potential [5]. Drawbacks of PEG Ratio - The PEG ratio does not account for changing growth rates, which can affect its reliability as a sole metric for investment decisions [6]. Screening Criteria for GARP Stocks - Successful GARP investments should meet specific criteria, including a PEG ratio less than the industry median, a P/E ratio below the industry median, a Zacks Rank of 1 or 2, and a market capitalization greater than $1 billion [7][8]. Selected Stocks for GARP Investment - Sirius XM Holdings (SIRI): A radio broadcasting company with a Zacks Rank of 2, a Value Score of A, and a long-term expected growth rate of 10% [9][10]. - Carnival Corporation (CCL): The largest cruise operator globally, with a revenue growth rate of 16.4% for 2024, a Value Score of A, and a Zacks Rank of 1 [11][12]. - JD.com (JD): A supply chain-based technology provider in China, boasting a long-term historical growth rate of 63.5% and a Zacks Rank of 1 with a Value Score of A [13][14]. - Abercrombie & Fitch (ANF): A specialty retailer with a Zacks Rank of 1, a Value Score of A, and a long-term historical growth rate of 47.9% [15].