In the US, quality growth stocks proved their mettle in the sell-off and have led the rebound since March. On the UK market, there has been a similar flight to quality but some traditional defensive stocks have also done well. In the absence of many exciting growth stories that aren't already on stretched valuations, there have been some surprises on this month's growth at a reasonable price (Garp) screen.
- In yet another sign Covid-19 has turned the world upside down, British American Tobacco (BATS) is ranked second on our growth at reasonable price (Garp) screen of FTSE All Share companies. Less surprisingly, it fails the EPS growth forecast test (although expectations are mildly positive over one and two years) but thanks to commitment to its dividend so far and a positive EPS growth trend over the past five years, it does well enough on our mandatory price-to-earnings/growth (PEG) measure and its defensive characteristics help it score on other tests.
- The top ranked company, Hikma Pharmaceuticals (HIK), carries more of the hallmarks of a growth stock, yet it still has a PEG of below one, indicating good value for a stock that offered investors cheer even in the depths of the market sell-off earlier this year.
- Few smaller companies score well against the different tests we use for small cap shares. The weak results against our EPS forecast tests could be a warning of value traps. In the coming months, however, this screen will be well worth watching for bargain growth when the economy turns the corner.