Stock Quotes in this Article: CBST, NVR, TIBX, WAT

BALTIMORE (Stockpickr) -- Have you been "going GARP" in this market?

Don't let the less-than-catchy name fool you. GARP, which stands for "growth at a reasonable price," is one of the most attractive strategies in most investors' playbooks right now. The GARP approach combines the two major fundamental schools of thought: growth investing and value investing. The goal is to spot stocks that can achieve significant growth but still have a fundamental backstop in their current balance sheet or earnings numbers.

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To be clear, the GARP approach isn't about looking for a bargain. High-P/E stocks aren't off limits to a GARP investor as long as those higher earnings multiples are justified by hefty growth rates.

GARP really shines in markets like the one we're in now. With stock prices climbing steadily higher, growth stocks are enjoying a full-blown rally this spring. Keeping a value component to your stock picking ensures that you can grab onto the market's highest-momentum names without nearly as much risk to the downside in the buying sputters out.

That's why today we're taking a closer look at four GARP names that sport double-digit annual revenue growth rates without breaking the value rules. Here's why these four stocks are worth buying this summer.

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NVR

2013 has been a fairly tepid year so far for NVR (NVR). Shares of the $5 billion homebuilder really haven't taken part in the real-estate-fueled rally that's been sending most other housing-related names soaring in 2013. The stock is only up 8% year-to-date -- that's half the performance that "boring" names such as Procter & Gamble (PG) have turned out this year. And all the while, NVR has been making some attractive investments in its core markets.

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NVR has traditionally been a lower-risk homebuilding stock than most of its peers; the firm went bankrupt in the early 1990s, and management's risk appetite has been toned down ever since. As a result, the firm didn't have to take the same sized write-downs that many peers ate during the housing crash of 2008 because they didn't over-leverage themselves with speculative land in the first place. Better still, NVR's business is focused around one of the strongest housing markets in the country: the Baltimore-Washington corridor.

At first glance, NVR's P/E ratio looks scary at 26. But back out growth rates and suddenly the firm's earnings multiple looks a whole lot more reasonable. A solid balance sheet with more than a half-billion dollars in net cash (that's 10% of the firm's market capitalization) is even more impressive. NVR's ability to operate without the huge leverage seen at peers is a very attractive attribute -- especially once interest rates are allowed to start floating higher.

Cubist Pharmaceuticals

Specialty pharmaceutical firm Cubist Pharmaceuticals (CBST) is another name that fits the GARP mold. For the last decade, the firm's cash cow has been Cubicin, an antibiotic used to treat MRSA -- its Entereg bowel drug is the other drug that's being actively marketed by the company.

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Like other pharma firms, Cubist has the threat of patent expiration hanging over its head. Unlike big pharma, however, a very concentrated drug portfolio means that losing exclusivity on Cubicin (its sole blockbuster drug) would be hugely destructive for sales. But CBST has some attractive new names in its pipeline, including three drug candidates that will enter Phase III trials in 2013. With a while until Cubicin's exclusivity ends in 2017, the firm should be able to generate ample cash to acquire and develop new pipeline contenders.

Legislation should add an extra tailwind to Cubist. Because the firm's focus is on antibiotics, it should be able to benefit from new laws that extend patent protection for new antibiotic drugs. The firm has also been keeping its sales force busy, partnering with other small pharma firms to co-market drugs for the benefit of both.

While Cubist is likely to look more expensive in the next couple of years as R&D costs for its late-stage drugs dilutes earnings, the firm looks attractive from a GARP standpoint. Cubicin should continue to see brisk sales growth, and new offerings would quickly accelerate that growth. At the same time, the firm boasts a net cash position of more than $600 million -- plenty of dry powder to ramp up spending to bring drugs to market without having to resort to balance sheet leverage.

Cash generated by Cubicin should be more than enough to feed CBST's spending appetite in 2013. For investors willing to stomach the headline risk of a concentrated pharmaceutical firm with late-stage pipeline drugs, Cubist is a solid choice.

Tibco Software

Palo Alto-based Tibco Software (TIBX) makes business software that integrates customers' IT infrastructure. In short, Tibco's software helps its customers' applications communicate with one another. While it's far from a sexy corner of the tech sector, service-oriented architecture (industry-speak for what TIBX does) is certainly lucrative. That's evident from Tibco's stair-step sales and profit growth over the last few years.

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Tibco's middleware rivals include some of the biggest blue chip names in the tech sector -- which is not necessarily a bad thing. With tech sector cash sitting at an all-time high, and Tibco's platform one of the most attractive in the industry, the firm could be a solid acquisition target for a firm looking to put its cash to work. A relatively small market capitalization makes the possibility of a buyout look much more reasonable in 2013.

Financially, Tibco is in great shape. The firm boasts double-digit net margins for its efforts, as well as a balance sheet that carries almost $300 million in net cash. With sales up nearly 65% since 2009, and profits more than doubled over that same time period, TIBX's growth is undeniable. Even though the firm is far from cheap, it looks like a solid GARP name right now.

Waters

Waters (WAT) makes analytical laboratory instruments used by medical and industrial customers. The firm's products are used for everything from quality control at manufacturing plants to pharmaceutical development to academia. As product safety concerns continue to be a big trend in emerging markets like China, WAT should see demand for its tools continue to climb.

Waters main business is making chromatography and mass spectrometry instruments, tools that have a wide array of applications in industry. Because the firm's has a reputation for building high-end, sophisticated laboratory tools, it should continue to attract desirable customers even as rivals vie for a bigger share of the technical instrument market. The introduction of new tools, some of which use disposable components, should help buoy sales for Waters – reordered supplies offer a stellar recurring revenue source that's extremely sticky.

A balance sheet with a small net-cash position puts Waters in a good position to weather any economic storms. While its sales are somewhat susceptible to economic hiccups (as labs temporarily lose funding when times are tough), the fact that WAT can effectively eradicate its debt with cash on hand gives it a big advantage. So do its margins. Waters has historically converted more than a quarter of its sales into profits each year, and those profit margins have been creeping higher in recent years.

This rising tide of economic growth should help send WAT higher in 2013.

To see these stocks in action, check out the at GARP Stocks portfolio on Stockpickr.



-- Written by Jonas Elmerraji in Baltimore.

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At the time of publication, portfolios managed by author were long TSLA.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.


Follow Jonas on Twitter @JonasElmerraji