GARP
“Bäume wachsen nicht in den Himmel” - German proverb
“Trees don’t grow to the sky.” I first heard this proverb at an investment presentation early in my career. It was the 1990s and some seasoned professional was waxing philosophical about the stock market. Around the same time, I also learned the acronym GARP - Growth at a Reasonable Price. Peter Lynch at Fidelity, with his exceptional performance at the helm of the Magellan Fund, embraced GARP as an investment strategy. Here’s a link if you want to learn more: GARP investing. From a marketing perspective, GARP is a winner: it’s snappy, fun to say, and easily understood. As an investment strategy, it blends a focus on growth with the price discipline of value investing - the best of both worlds.
GARP investing hasn’t been an exciting strategy for a while now. Since the Great Recession, growth - regardless of price - has been the perennial favorite. My sense is this is changing. I mentioned to clients back in March that our current environment has a real 1970’s vibe to me. Whether it’s the COVID testing lines of the last 12 months that were reminiscent of the 70’s gas lines, or the fact that we all seem to be waiting more often - for supplies and service. Not to mention, inflation - well, hello there! Welcome back! Cue the “Welcome Back, Kotter” theme song and break out the bellbottoms.
This period we are navigating strikes me as a transition from a theme of limitlessness to one of constraint. I think this is a good thing. The technological revolution that unleashed incredible productivity and leaps forward over the past 30 years has also promised, falsely, unlimited growth. Friends, that’s marketing. Trees don’t grow to the sky.
Our obsession with growth also means we’ve grown accustomed to very few constraints over the last few decades: same-day delivery, steadily increasing stock and home prices, easy and inexpensive capital. But seasonality isn’t just how we experience nature - the economy and markets move through phases, too. As hard as we have tried to engineer away cycles, they tend to be part of the human experience.
The reason GARP has reemerged for me now is because it has a different, but equally resonant, meaning: Growth at a Reasonable Pace. We don’t need to shoot the moon day after day - it’s exhausting. We should all strive to be productive, kind, expansive humans - but we can take breaks, long walks, and savor life. Be successful, but also dawdle every once in a while. Hit your KPIs, then take a nap.
Embracing Growth at a Reasonable Pace has far-reaching implications for us as a species, too - slowing down, scaling down, might be just what the planet needs.
It’s in my nature to be optimistic, and I remain hopeful, even as we face many challenges ahead. Periods of transition always create uncertainty and it can be so hard to go with the flow. In those moments, remember to check in: what expectations are you trying to exceed, and are they really yours?
A few months ago I came across a Ted Talk by Kevin Kelly (below), and I love the message of optimism. He also expresses Growth at a Reasonable Pace beautifully: we only need a little bit more progress than decline to see real improvement over time.
Trees don’t grow to the sky. They don’t need to - trees are perfect, and so are you.
Kelly
