Garp investing financial sector plays within a GARP

Financial sector plays within a GARP framework are looking attractive as US banks approach their Q2 earnings season. Several regional banks trade at P/E ratios below 10, but still guide for mid-single-digit loan growth in 2024, giving a balance between valuation comfort and growth. Financial Edge Training www.fe.training › financial-markets › garp-investing When we analyze the investable universe of U.S. large-cap stocks, we begin by eliminating names that have what we consider to be fundamental flaws—such as poor capital allocation and poor management teams. This process narrows the S&P 500 Index from about 500 stocks to approximately 125 that we think have better odds of outperforming over the long term. Within this narrower universe, we have often found that the most compelling opportunities have several factors in common, and we define these companies as growth-at-a-reasonable-price (GARP) stocks. This segment of the market has generated significantly higher cumulative returns than the broader market over the last three decades (Fig. 1). Midstream energy stocks are emerging as a subtle GARP play, with reasonable enterprise value-to-EBITDA multiples and 7–9% projected distribution growth, benefiting from stable energy transport demand despite oil price volatility.