Benzinga - by Zacks, Benzinga Contributor.
If you are looking for a profitable portfolio of stocks offering the best of value and growth investing, try the growth at a reasonable price or GARP strategy.
The strategy helps investors gain exposure to undervalued stocks with impressive prospects. Unlike a blend strategy, a portfolio that uses GARP investing is expected to include stocks that offer the best value and growth investing. Booz Allen Hamilton (NYSE: BAH), Ameriprise Financial (NYSE: AMP), CrediCorp (NYSE: BAP) and AECOM (NYSE: ACM) are some GARP stocks that hold promise.
GARP Metrics — Mix of Growth & Value Metrics The GARP strategy seeks to offer an ideal investment by utilizing the best features of value and growth investing. Investors adopting the GARP approach prefer buying stocks priced below the market or any reasonable target determined by fundamental analysis. These stocks also have solid prospects in terms of cash flow, revenues, earnings per share and so on.
Growth Metrics
A strong earnings growth history and impressive earnings prospects are the main concepts that GARP investors borrow from the growth investing strategy. However, instead of super-normal growth rates, pursuing stocks with a more stable and reasonable growth rate is a tactic of GARP investors. Hence, growth rates between 10% and 20% are considered ideal under the GARP strategy.
Another metric that growth and GARP investors consider is the return on equity (ROE). GARP investors look for a strong and higher ROE than the industry average to identify superior stocks. Stocks with positive cash flows find precedence under the GARP plan.
Value Metrics
GARP investing prioritizes the popular value metrics — the price-to-earnings (P/E) and price-to-book (P/B) ratios. Though this investing style picks stocks with higher P/E ratios than value investors, it avoids companies with extremely high P/E ratios.
Using the GARP principle, we ran a screen to identify stocks that should offer solid returns in the near term.
Screening Parameters Along with the criteria discussed in the above section, we have considered a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Last 5-year EPS & projected 3-5-year EPS growth rates between 10% and 20% (Strong EPS growth history and prospects ensure improving business.)
ROE (over the past 12 months) greater than the industry average (Higher ROE than the industry average indicates superior stocks.)
P/E and P/B ratios less than the M-industry average (P/E and P/B ratios less than that of the industry indicate that the stocks are undervalued.)
Here are four of the five stocks that made it through the screen:
Booz Allen Hamilton is a provider of management and technology consulting, analytics, engineering, digital solutions, mission operations, and cyber expertise to the United States and international governments, corporations and not-for-profit organizations. The company currently carries a Zacks Rank #2.
Booz Allen Hamilton has gained 45.9% year to date. It has a trailing four-quarter earnings surprise of 12.5%, on average. The Zacks Consensus Estimate for fiscal 2025 earnings has moved 2.4% north to $6.05 per share over the past 30 days.
Ameriprise Financial is a diversified financial services company that offers a wide range of products and services focused on financial planning and advice. The company helps its individual and institutional clients achieve their financial objectives. AMP currently carries a Zacks Rank #2.
Ameriprise Financial has gained 35.4% in a year. It has a trailing four-quarter earnings surprise of 2%, on average. The Zacks Consensus Estimate for 2024 earnings has moved 0.1% north to $34.95 per share over the past 30 days.
CrediCorp is a limited liability company that acts as a holding company, coordinates the policy and administration of its subsidiaries, and engages in investing activities. BAP currently carries a Zacks Rank #2.
CrediCorp has gained 36.9% year to date. It delivered a trailing four-quarter earnings surprise of 0.99%, on average. The Zacks Consensus Estimate for BAP's 2024 earnings has moved 0.6% north to $18.76 per share over the past 30 days.
AECOM specializes in providing integrated services for planning, construction and maintenance of infrastructures that include consulting, architecture, engineering and managing the requirements for energy, water and environment to various private and public clients. ACM currently carries a Zacks Rank #2.
AECOM has gained 7.6% over a year. It has a trailing four-quarter earnings surprise of 3.03%, on average. The Zacks Consensus Estimate for ACM's fiscal 2024 earnings has been unchanged at $4.49 per share over the past 30 days.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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