Growth at a Reasonable Price (GARP) refers to stocks with good growth, moderate valuations and good quality financial statements represent ‘the best of all worlds’.
Low Volatility is aversion to leverage and the ‘lottery effect’ lead to low-risk stocks performing better than expected under traditional finance theory.
Under reaction to news and extrapolation of past trends lead to past winners continuing to win and past losers continuing to lose.
Excessive pessimism about the prospects of ‘dull’ companies and optimism about ‘glamour’ companies leads to mispricing.
Higher (diversifiable) risk of smaller companies leads to better returns of smaller companies as a group.
Our ‘True Styles’ process aims to improve long-term returns with a lower correlation between styles.
These ‘raw styles’ can be driven by shared components, however we seek exposure to the aforementioned pure style, using systematic filters to identify ‘True Styles’.
The ‘True Styles’ approach also reduces unwanted volatility from the individual styles – the target result is enhanced risk adjusted returns and the creation of attractive portfolio components.