Growth at a Reasonable Price

Fund managers who seek growth at a reasonable price (GARP) try to strike a balance between strong earnings and good value. Some managers in this group find moderately priced growth stocks by buying the rejects of momentum investors; often, these stocks have reported disappointing earnings or other bad news. GARP managers also look for companies that have been ignored or overlooked by market analysts and that are therefore still selling cheaply. Like value investors, GARP investors try to find companies that are only temporarily down and out and that have some sort of catalyst for growth in the works. Because many GARP managers are sensitive to high price tags, this group of growth funds often features lower-than-average price multiples than other flat-out growth funds. GARP funds also tend to have lower turnover rates than pure-growth funds and are therefore generally more tax-efficient than more aggressive growth offerings.