Global GARP
Quorum's core equity strategy allows our clients to cost-effectively gain access to a relatively broad stock investment universe. Global GARP is an acronym that stands for Growth at a Reasonable Price. It may be hard to believe, but there are many investment strategies employed by perfectly respectable money managers that eschew price in favor of price momentum, or ignore earning forecasts in favor of company liquidation value. Growth managers very often will pay extreme prices for the stock of companies that provide investors with access to potentially high sales and earnings growth. In our view, chasing growth at the expense of reasonable valuation verges on the speculative as such activity has a high degree of forecasting uncertainty, and therefore risk of disappointment of expectations. Value managers, on the other hand, view investments from the perspective of strict absolute valuation methods, and place a high priority on current income, or the breakup value of a company. They focus on companies that, for one reason or another, have experienced a price decline in their stock sufficient enough to make current earnings, dividends, assets and/or earnings growth to appear inexpensive. As a result, they tend to miss out on many well managed, high growth companies in their stock selection process. As a GARP manager, we tend to view the world from the overlap of these two perspectives. Quorum selects equities from the perspective that assigns a fair and objective relative value to companies that provide current income in the form of dividends, as well as earnings growth and therefore potential future dividends increases. In rare instances, the quality and magnitude of growth in earnings of a particular company is available at such a discounted price that we will invest in stocks without dividends. Our GARP stock selection process has been institutionalized and is highly quantitative in nature. |