GARP Stocks

 Investors typically view growth and value as two totally distinct equity types.

But there's a style that seeks to identify both characteristics in a single stock. Growth at a reasonable price, or GARP, was popularized by Peter Lynch, the legendary former manager of Fidelity Magellan Fund (FMAGX). During his 13 years at the fund's helm, ending in 1990, the fund returned an annualized 29.2%, more than double the S&P 500's performance during that period.

The key to identifying GARP stocks is to screen for stocks with higher growth rates than the broader market and lower-than-average valuations.

In its GARP screen, Fidelity filters for criteria including:

• Quarterly and yearly earnings growth.
• Earnings growth forecasts.
• Price-to-earnings (P/E) ratio.
• Price/earnings-to-growth (PEG) ratio.
• Security price.
• 90-day average trading volume.