iShares MSCI USA Quality GARP ETF (GARP)

Overview

GARP, previously known as iShares Factors US Growth Style ETF under the ticker STLG before June 3, 2024, is a company that targets investments primarily in large- and mid-cap US growth stocks. These stocks are distinctive because they demonstrate both value and quality characteristics or what is often termed as 'growth at a reasonable price'. GARP employs a meticulous selection process that originates from the MSCI USA Index, focusing on stocks that meet their stringent criteria. This unique approach ensures that only stocks that exhibit a substantial potential for growth, alongside value and quality, are included, making it an attractive option for investors looking for diversification and growth opportunities in the United States market.

Products and Services

GARP's main product is its investment strategy focused on growth at a reasonable price, associated with several key services:

• Stock Selection Process

  The comprehensive selection process starts with the MSCI USA Index, filtering for stocks based on a dual focus. Initially, all stocks are assigned a growth score based on five criteria: long-term and short-term forward EPS growth rates, historical EPS and sales per share growth trends, and the current internal growth rate. This process is crucial as it ensures that only stocks demonstrating strong growth prospects are considered further.

• Growth Score Based Selection

  After the initial screening, stocks with higher growth scores are handpicked until they constitute about 50% of the parent index's value. This step meticulously sieves through the potential candidates, singling out those that not only show promising growth but also are sizable enough to impact the portfolio positively.

• Tilt Score Allocation

  Subsequent to selection, each stock is assigned a tilt score that reflects its value (using metrics such as P/B, forward P/E, and EV/CFO) and quality (assessed through ROE, D/E, and earnings variability) relative to its sector. This scoring is pivotal as it leans the portfolio towards securities that score favorably on both counts, aiming for an optimal balance between growth, value, and quality.

• Portfolio Diversification and Adjustment

  The portfolio is then carefully diversified and adjusted according to the tilt scores, ensuring a balanced exposure to favorable stocks while minimizing risk. This strategy is an integral part of maintaining a robust portfolio that can withstand market fluctuations and capitalize on growth opportunities.

• Quarterly Rebalancing

  To maintain its strategic alignment with the ever-changing market conditions, GARP undertakes the rebalancing of its portfolio on a quarterly basis. This regular rebalancing is essential for adapting to shifts in the market, ensuring that the portfolio remains relevant and continues to perform strongly against its benchmarks.