Wanger GARP
An Overview of GARP Go-Getters, a Ralph Wanger strategy
Meaning: GARP stands for Growth at a Reasonable Price, the Go-Getters portion was added by the creator of the mimic screen
Period of Reign: 1960-2000
Associated With:the Acorn Fund, run by Harris Associates. Founder of Columbia Wanger Asset Management which manages $16 billion
Highlights: Returned 17.2% annual from 1970 to 1998 versus the S&P return of 14.4%. In 1988, purchased shares of International Gaming Technology for $1/share and sold it in 1993 for $40/share
Ralph Wanger investing style summarized
- Concentrate on spotting trends that will last for at least 4-5 years
- Think small companies, though consider avoiding micro. Specifically look for small companies that dominate their niche through
- Look downstream for the best profits
- Insist on financial strength
- Look for companies that are cheap in relation to their earnings-growth potential
- Sell reluctantly, if you have done proper research, you should be able to hold for 4-5 years unless it becomes dangerously overpriced
- Look for strong, proven management that doesn’t rely on a single personality
Ralph Wanger Books
To be added.
Additional Ralph Wanger resources
- A short interview with Ralph Wanger from 2007
- A great look at the investing style of Ralph Wanger
Stock Screen Parameters to Mimic Ralph Wanger’s GARP Investment Style
The below bullet points attempt to recreate Ralph Wanger’s investment style using technical parameters that can automatically be screened. These parameters are from an MSN interpretation, and were run using the MSN stock screener. The text in italics explains how the parameter was defined in the screener.
1) Market Cap: Look for small cap companies
Parameter: Market Capitalization <= 1,000,000,000
2) Management: Wanger likes good management. One indicator for this is high employee income compared to the industry
Parameter: Income Per Employee >= Industry Average Income Per Employee
3) Inventory: Look for companies that are selling quickly and not accumulating inventory
Parameter: Inventory Turnover >= Industry Average Inventory Turnover
4) Debt: Eliminate companies with too much debt
Parameter: Debt to Equity Ratio <= .5
5) Growth: Find companies with a strong record of revenue growth, and strong expected earnings growth
Parameter: 5-Year Revenue Growth >= 20
Parameter: EPS Growth Next 5 Years - High As Possible
6) Value: Find companies that are selling at a good value compared to their expected growth
Parameter: P/E Ratio: Current <= EPS Growth Next 5 Years
