Top Stocks to Play a Dog-Obsessed, Cat Video-Addicted Culture
In market speak, so-called "cats and dogs" set the bar for
underperforming or flawed stock picks. That's why, in a bull
market, we may hear analysts crack that everything is on the rise
the cats and dogs. An outdated pejorative perhaps, considering
these furry creatures are the drivers of a growth sector that not
only survived recent economic downturns, but barked and purred all
the way to the bank.
Figures from the American Pet Products Association tell us that the pet industry has more than tripled over the past two decades. In 1994, the first year the organization began gathering data from various market research sources, US animal owners doled out $17 billion in pet products and services. This year, that figure is expected to climb to over $55 billion.
Between 2007 and 2009, spending on our furry family members rose by $4.3 billion. So, during the Great Recession's bear market, we may have heard analysts crack that everything was on the decline -- excluding the cats and dogs.
Here, Minyanville will take a look at some of the stocks pet-loving investors may want to consider adding to their portfolios.
Because pets need to eat...
It may be the most repulsive thing we'll ever see or smell in a can, but at $20.64 billion, kibble takes the biggest bite out of the American pet market, and four manufacturers -- Mars, Procter & Gamble ( PG ), NestlÃ© (OTCMKTS:NSRGY), and Colgate-Palmolive ( CL ) claim the overwhelming global majority of it.
And in our ongoing effort to anthropomorphize our pets, mealtime is more and more mimicking the habits and preferences of the utensil-using set. Though Fido couldn't give the contents of his pooper scooper about frozen treats and craft beer, leave it to NestlÃ© to start shilling Frosty Paws ice cream (in 2011) and a brewery in Victoria, Canada, to concoct a chicken-flavored beer for dogs .
In January, Minyanville's own Hoofy and Boo reported on our need to ascribe to animals our cultural and religious dietary leanings with the continuing trend of vegan products and kosher pet food "manufactured under strict Rabbinical supervision." What else are we supposed to serve them at Pesach let alone their bark mitzvahs ?
Because they keep us healthy...
If the studies that say pets improve the health of their human parents -- boosting immunity, lowering blood pressure, and keeping depression at bay -- are true, it seems we owe it to them to return the favor. And if the market research about the pet health industry is accurate, many of us indeed already are.
A generation ago, when our four-legged companions were diagnosed with serious and/or expensive medical conditions, the tendency was to "put them down." Today, a kinder, more compassionate society is starting to offer them real status in the family unit and treating them to the benefits usually reserved for its bipedal members. Beyond traditional flea and worming treatments and vaccines, human areas of medicine like oncology, cardiology, dermatology, and dentistry are opening up to animals .
Big Pharma has taken notice of the $12.65 billion that went to supplies and over-the-counter medicine last year -- in addition to the $13.67 billion collected by veterinary clinics -- and they want in. Take Bayer's (OTCMKTS:BAYRY) acquisition of the vet-drugs unit of Teva Pharmaceutical Industries ( TEVA ) for $145 million, or Sanofi's ( SNY ) Merial buying out the animal-health division of India-based Dosch Pharmaceuticals. That being said, Pfizer ( PFE ) recently stepped away from pet health by fully divesting ownership of Zoetis Inc. (ZTS), the largest producer of medicine and vaccinations for companion animals and livestock.
Want to invest in stocks that distribute pharmaceuticals, diagnostics, equipment, software, and other medical products to veterinarians and animal clinics? The big dogs on the market are MWI Veterinary Supply, Inc. (MWIV) and Patterson Companies, Inc. (PDCO). VCA Antech (WOOF) , a North American-based system of over 600 animal hospitals, also has a diagnostic and a marketing-solutions arm.
Because we shop on their behalf...
Of course, revenues from food and over-the-counter and even prescription medical products for pets also bleed into the retail sector, which is dominated by just two companies -- and only one that's publicly traded. Together, PetSmart's (PETM) 30.9% and Petco's 19.9% market share comprise about 51% of the pet store industry and account for most of its growth. Beyond doggie beds, cat condos, and LED-lit aquariums, these superstores offer services like training, grooming, daycare, and even overnight "hotel" accommodations.
To be fair, with an online catalog of 859,690 products -- for every species from insects to horses -- Amazon.com (AMZN) should officially be considered a major player in the pet retail space, if only in the e-commerce category. Through its acquisition of Quidsi, Amazon even launched a dedicated pet store in 2011 with Wag.com.
And, finally, because they're so telegenic...
No well-balanced roundup of stocks benefiting from animal lovers' slow descent into insanity would be complete without mentioning the one place it is most often manifested. Since its first uploaded video of elephants at the San Diego Zoo, YouTube (GOOG), has been a virtual breeding ground for petxhibitionists and their patty-cake-playing cats, skateboarding bulldogs, and dubstep-singing parrots as well as the voyeurs who enjoy them. Truly, if any video will ever eclipse the view count of "Gangnam Style," it'll be one of a hamster dancing "Gangnam Style."