GARP performing better than value or growth: Jefferies By Investing.com

In a year marked by market oscillations between value and growth driven by rate cut expectations, GARP (Growth at a Reasonable Price) has emerged as the ultimate winner, according to Jefferies analysts.

With rates peaking in favor of growth stocks and strong economic data supporting value, Jefferies advises taking the middle path, focusing on compounders and low PE/G (price/earnings to growth ratio) stocks backed by earnings momentum.

The firm notes that in May, semiconductors and tech hardware led the market, driven by the AI theme, while property, consumer services, autos, and energy sectors lagged. Within Asia, Taiwan tech and China internet performed well, whereas Asian healthcare and pharma lagged the most.

Meanwhile, the recent risk-on rally globally is claimed to have supported GARP, making it the best-performing style for the year.

Jefferies explains that in the USA, PE/G investing has worked strongly, especially for large-cap growth tech names. In Europe, while GARP has been out of favor, investors are starting to focus on low PE/G companies as the market is no longer inexpensive.

In addition, analysts state that Asia stands out as the cheapest region on a PE/G basis, with the downgrade cycle nearing its end, making it an attractive market.

The firm notes that the first quarter earnings season update shows solid performance: US earnings beats are at 79%, Asia at 51%, Europe at 62%, and Japan at 57%, indicating an easing of downgrades and a robust outlook for GARP investing globally.