The GARP & Dividend IRA: Evolution Of A Portfolio

Last April, I introduced the “Sound Growth Portfolio,” a portfolio based on the experience gained from managing my own IRA for many years. It was and is a portfolio consisting of real funds in an actual IRA. However, it is not simply a growth portfolio. It also incorporated elements of value investing, and had a very strong preference for companies that pay dividends. The new name “GARP & Dividend” better reflects both the nature of the portfolio and much of my investing style. GARP is an acronym for “Growth At a Reasonable Price,” an investing strategy that balances growth and value investing.

An Updated Screen for the Portfolio A hallmark of GARP investing is use of the PEG Ratio, a metric introduced by legendary investor Peter Lynch. It compares the P/E Ratio of a company against its growth rate. A ratio of 1.0 or lower is generally desirable, though I once read that a PEG in the range between 0.8 and 1.8 is good. I use the PEG to rank stocks in my watch lists instead of other metrics I have used in the past.
I continue to look for positive Net Current Asset Value (NCAV). A positive NCAV means that a company can pay its total liabilities out if its current assets (cash, receivables, and inventory). That being so, debt is entirely manageable, if it exists at all, and is not a concern. A company with positive NCAV has plenty of funds for acquisitions, dividend payments, and stock buybacks.
Companies with positive NCAV are... Read more