Markets & Finance

Investing According to GARP


By David Braverman For those investors who use the "growth at a reasonable price" (GARP) approach to picking stocks, one important measure to look at is a stock's PEG. What is it? It's a measurement of a stock's

price-to-earnings ratio against its estimated

five-year EPS growth rate.

Here's an example. If Company X has a p-e of 20, and its earnings are growing at 30% per year, it has a PEG of 0.67. Company Y has a p-e of 10, with earnings growth estimated at 18% per year; its PEG is 0.56. GARP investors would pick Company Y -- the stock with the lower PEG measure -- since it is more attractively valued relative to its earnings potential.

The followng 15 stocks, listed alphabetically, are S&P 500 components and have the lowest PEGs in the index:

ADC Telecom (ADCT)

Advanced Micro (AMD)

Alltel (AT)

Andarko Petroleum (APC)

Apache (APA)

Burlington Resources (BR)

Eaton (ETN)

EOG Resources (EOG)

KB Home (KBH)

Loews Corp. (LTR)

National Semiconductor (NSM)

Occidential Petroleum (OXY)

Oracle (ORCL)

Power One (PWER)

Teradyne (TER) Braverman is a senior investment officer for Standard & Poor's


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