The explosion of media coverage about the markets, driven by the popularity of CNBC, has spawned a certain "short hand" that investors need to understand. Two common acronyms thrown around by financial commentators are GARP and GAAP. For the uninitiated, GARP stands for "Growth At a Reasonable Price." GAAP stands for "Growth At Any Price."

GARP and GAAP are used to describe investment styles. GARP investors buy growth stocks at what they feel are reasonable prices. GARP investors are not value investors, per se. They don't try to buy stocks that sell below their breakup value or trade at rock-bottom price/earnings ratios. GARP investors look at a company's growth prospects first and try to buy the growth at not necessarily wholesale prices but competitive prices relative to similar-type merchandise.

GAAP investors, on the other hand, don't look at valuation at all. Rather, these investors focus exclusively on the growth side of the equation. The faster the growth in profits and sales, the better the buy.

Obviously, GAAP investing is not for weak stomachs. Indeed, it takes a strong will to buy stocks that trade at 300 and 400 times earnings. Interestingly, however, this is exactly what the best-performing investors were doing in the last two years.

For my money, I feel a bit more comfortable with GARP than GAAP. I think that, over time, valuation does matter. To be sure, I don't mind paying up a bit for quality merchandise. Still, I think investors need to consider both growth and valuation when choosing long-term investments.

I also like GARP better than GAAP because GARP is more conducive for a long-term, buy-and-hold investing. With GAAP, you basically are chasing momentum. When momentum dies, you find the next stock that has the momentum. To me, this is a tough way to invest over a five- or 10-year period. I would rather buy solid growth stocks at reasonable prices (GARP) and hold them for a long time.