Goldman Sachs Highlights GARP Stocks for Smart Investors: A Look at Growth at a Reasonable Price

Goldman Sachs, a renowned name in the world of finance, recently conducted a screening for Growth at a Reasonable Price (GARP) stocks, offering investors a golden opportunity to enhance their portfolios. In this article, we will delve into the world of GARP stocks and explore some of the promising selections from Goldman Sachs’ screening process. These stocks combine the allure of growth with the comfort of reasonable valuations, making them an attractive choice for investors.

What are GARP Stocks?

GARP, which stands for Growth at a Reasonable Price, is an investment strategy that seeks out stocks with the potential for robust growth while ensuring that they are not overvalued. In essence, it’s the sweet spot between growth and value investing. Investors seeking GARP stocks aim to capitalize on companies that are poised for expansion but are not burdened by sky-high price tags.

Goldman Sachs’ Selection of GARP Stocks

Goldman Sachs’ Head of U.S. Equity Strategy, David Kostin, expressed the bank’s commitment to offering investors a curated list of GARP stocks. Kostin understands the importance of finding investment opportunities that provide growth potential without exposing investors to the risk of inflated valuations. Among the stocks that passed Goldman Sachs’ screening process, here are some notable picks:

1. Target
2. Las Vegas Sands
3. Live Nation
4. First Solar
5. Celanese
6. General Electric
7. Everest Group
8. Booking Holdings

The Resurgence of Growth Stocks

In the backdrop of an eventful financial landscape, growth stocks have made a remarkable comeback after facing adversity in 2022. The iShares Russell 1000 Growth ETF (IWF) has surged by an impressive 37% in 2023, showcasing the renewed investor enthusiasm for growth-oriented investments. In stark contrast, its value counterpart, the IWD ETF, has recorded a modest 5% increase year to date. To put things into perspective, the IWF suffered a decline of nearly 30% the previous year.

Key Players Driving Growth

The resurgence of growth stocks can be attributed to the optimism surrounding the potential of artificial intelligence (AI) to bolster the profits of technology companies. Notable stocks within the IWF ETF, including Nvidia, have experienced significant gains, with Nvidia’s value surging by more than 200%. Meta Platforms, Spotify, and Uber Technologies have also emerged as substantial winners in this resurgence.

What Sets GARP Stocks Apart?

So, what distinguishes GARP stocks from the rest of the pack? Goldman Sachs emphasizes that these stocks offer the ideal combination of high growth potential and reasonable valuations. According to their analysis, the median stock in the GARP screen is expected to witness earnings growth of 13% in 2024. In comparison, the median S&P 500 stock is projected to grow earnings by 8% in the same period. Furthermore, these GARP stocks are trading at a forward price-to-earningsThe price-to-earnings ratio, often abbreviated as P/E ratio, is a fundamental metric used by investors and analysts to evaluate the relative value of a company's shares in the stoc... More (P/E) ratio of approximately 16 times, whereas the median S&P 500 stock has a P/E ratio of 17 times. This indicates that GARP stocks are not only expected to deliver superior growth but also come with a more attractive valuation.

Bottom-line: Goldman Sachs’ screening of GARP stocks presents a compelling opportunity for investors seeking the perfect blend of growth and reasonable valuations. As growth stocks regain their momentum in 2023, these selections offer the potential for substantial returns while mitigating the risk associated with overpriced assets. With a clear focus on companies poised for robust earnings growth, GARP stocks present a promising avenue for investors to navigate the ever-evolving financial markets with confidence. So, consider adding these GARP stocks to your investment radar and position yourself strategically for the future.