GARP Strategy Analysis in UK Industrials: Market Opportunities and Valuation Insights

This analysis is based on the Proactive Investors report [1] published on November 5, 2025, which examines the continued relevance of Growth at a Reasonable Price (GARP) investing in UK industrials. The report comes at a critical market juncture where sector rotation has created valuation opportunities in quality industrial companies.

The current market environment presents a complex landscape. While Asian markets experience significant volatility following a Wall Street tech rout, UK markets have shown relative resilience [1]. The Industrials sector is currently underperforming with a -2.51% decline, contrasting sharply with stronger performance in Energy (+2.50%), Technology (+0.64%), and Healthcare (+0.50%) [0]. This sector underperformance has created valuation dislocations that GARP investors can exploit.

GARP, popularized by fund manager Peter Lynch in the 1980s, represents a strategic middle ground between pure value and growth investing, seeking companies with solid earnings growth at reasonable valuations, typically measured by price/earnings-to-growth (PEG) ratios below 1.0 [1]. The strategy’s renewed relevance stems from market conditions that have oversold quality industrial names during recent rotations.

The broader corporate earnings environment remains supportive, with the S&P 500’s blended earnings growth rate for Q3 2025 standing at 13.7%, and 86.9% of companies beating EPS estimates [2]. This underlying corporate strength suggests that the current industrial sector weakness may be more cyclical than fundamental.

Johnson Matthey exemplifies the type of company aligning with GARP principles through strategic portfolio simplification. The company recently completed the sale of its Medical Devices business at attractive valuations and agreed to sell its Catalyst Technologies business for £1.8 billion [5]. This fundamental reshaping positions Johnson Matthey for cash flow positivity by 2026/27, with FY 2024/25 preliminary results showing strong performance with sales up 17% driven by higher first fill volumes and catalyst growth [5].

Panmure Liberum’s analysis reveals that quality UK industrial names are trading below long-term valuation averages despite credible growth outlooks [1]. These companies are trading below historic cyclically adjusted price/earnings (CAPE) ratios while offering mid-term earnings growth in the high single digits, creating compelling risk-reward profiles for disciplined investors.

UK manufacturers are increasingly embracing technology as a transformative force. According to PwC’s Make UK Executive Survey 2025, almost half of manufacturers plan to expand their product portfolios, with innovation central to the sector’s green economy transition [3]. Export expansion is also accelerating, with 37% of manufacturers planning to export to new countries in 2025, up from 23% the previous year [3].

The industrial capital goods sector has seen declining M&A transactions from 2021-2024, though strategic sales remain strong relative to financial buyer activity [4]. This trend indicates that quality industrial assets continue to command premium valuations from strategic buyers, supporting the investment thesis for well-positioned companies.

The analysis reveals several risk factors that warrant attention. Market volatility and sector rotation dynamics continue to create short-term uncertainty, while energy price fluctuations and inflation pressures could impact margins [0]. The timing and implementation of the UK industrial strategy remains uncertain, potentially affecting near-term sentiment.

Despite these risks, several compelling opportunities emerge. The current valuation dislocation in quality industrials represents a rare entry point for disciplined investors. Companies with strong balance sheets, clear strategic focus, and exposure to secular growth trends (sustainability, digitalization) are particularly attractive [1].

The current market rotation may persist in the short term (3-6 months), potentially creating additional buying opportunities. However, medium-term trends (1-2 years) driven by technology adoption, infrastructure spending, and sustainability initiatives should support sector fundamentals [3, 4].

The UK industrials sector presents compelling GARP opportunities amid current market dislocations. Quality companies like Johnson Matthey, Renishaw, and Spirax Group are trading below historical averages while maintaining solid growth prospects [1]. The sector’s exposure to secular trends including technology adoption, sustainability initiatives, and reshoring provides strong foundations for long-term value creation.

Manufacturing companies emphasizing transformation stories and operational improvements are well-positioned to attract GARP-focused investors. Key themes include portfolio simplification, technology adoption, sustainability investments, and international expansion [3, 4].

The current environment rewards investors with patience and fundamental analysis discipline. As Johnson Matthey’s strategic transformation demonstrates, companies focused on core competencies while embracing secular growth trends offer the most compelling risk-adjusted returns in the current market [5].