Nov. 23 (Bloomberg) -- As an unrepentant cheapskate, I almost never pay more than 15 times earnings for a stock.

I recognize, however, that some people are more willing to pay for quality than I am. That’s why, about once a year, I look at stocks that are a bit beyond my price range but have the potential to go higher.

These are GARP stocks. GARP is Wall Street slang for “growth at a reasonable price,” the middle ground between growth investing and value investing. The ones I am writing about today, including Walt Disney Co. and Union Pacific Corp., sell for between 15 times earnings and 20 times earnings.

At today’s multiple of 16, I don’t own Disney, though I am tempted. Its theme parks, movie studios, television channels and toy stores achieve the synergy most companies only dream about.

Investors have had a variety of complaints about Disney in the past half dozen years. Management of the Burbank, California, company suffered from infighting. The acquisition of the ABC television network was considered a flop by some people as network television lost market share to cable. People worried that high gasoline prices and the recession would keep people away from Disney’s theme parks.

Yes, Disney was a place of sharp elbows and hurt feelings under former Chief Executive Officer Michael Eisner, but he stepped down in 2005.

In the final five years of Eisner’s tenure, Disney earnings never got above $1.22 per share. Under Robert Iger’s stewardship since then, Disney hasn’t earned less than $1.64. The company made it through the Great Recession of 2008-2009 without bleeding red ink.

Banking on TV

ABC has been a disappointment. Still, Disney’s media operations include an 80 percent stake in ESPN, a 50 percent interest in the ABC Family channel, Lifetime Entertainment and 10 TV stations. Collectively, the media businesses are Disney’s largest source of revenue.

The twin threats of high gasoline prices and the recession didn’t hurt the theme parks as much as feared. The past couple of years, revenue from the parks grew 7 percent to 8 percent annually.

Disney’s stock price topped out at about $43 a share in April 2000. Today, shares trade at about $30. And yet the company is bigger and better now than it was then.

In the fiscal year ended in October, Disney earned $3.3 billion on revenue of $36 billion. Back in 2000, profits were $920 million on sales of around $25 billion. Earnings, both absolute and per share, have approximately tripled, and yet the stock price today is about 28 percent below its level back then.

Riding the Railroads

Union Pacific Corp., based in Omaha, Nebraska, weathered the recession superbly. It’s the second-largest U.S. railroad by revenue and earned a record $4.54 a share in 2008. This year analysts look for $3.68, which would be the company’s second- best showing.

Diluted earnings have grown at a 16 percent clip the past five years. The stock sells for 17 times earnings, reasonable in light of the growth.

The takeover of Burlington Northern Inc. by Warren Buffett’s Berkshire Hathaway Inc. called investors’ attention to some of the virtues of railroads. They have considerable operating leverage in an improving economy and are more energy- efficient than trucks in carrying large amounts of freight.

Buffett obviously liked Union Pacific, even if in the end he preferred Burlington Northern. Berkshire Hathaway owned 1.9 percent of Union Pacific as recently as Sept. 30, but has now divested the stock.

Medical Play

Another intriguing GARP stock is Stryker Corp. The company, based in Kalamazoo, Michigan, makes orthopedic implants and medical equipment. Its profits have risen every year from 2000 through 2008, and its five-year earnings growth rate is almost 20 percent.

While the stock isn’t cheap at 17 times earnings, the earnings rate is higher than the price-to-earnings ratio, which is always nice to see.

One cloud on Stryker’s horizon is that last month a grand jury in Boston indicted its Stryker Biotech LLC unit, which makes bone surgery products, and the unit’s former president and three others on charges of fraud.

The indictment charges that Stryker Biotech promoted the use of some of its products in a manner contrary to that approved by the Food & Drug Administration.

After the Scandal

Stryker Corp. issued a statement saying it was “disappointed” and hopes to reach “a fair and just resolution of this matter.” I think the adverse development is serious, but over the years I have seen numerous scandals blow over, after a time.

I also love the parent company’s balance sheet, with debt less than 1 percent of equity.

Disclosure note: I own Berkshire Hathaway personally and for clients. I have no long or short positions, personally or for clients, in the other stocks mentioned in this article.

(John Dorfman, chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own. His firm or clients may own or trade securities discussed in this column.)

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To contact the writer of this column: John Dorfman at jdorfman@thunderstormcapital.com

Last Updated: November 22, 2009 21:00 EST