Pet stocks are stars, not dogs, so far in ’16

NEW YOR K • Americans’ attachment to their pets has fostered a US$60-billion industry that is producing bestin-breed stock performance.

Shares of a clutch of companies that sell pet food, develop diagnostic tests for animals and offer veterinary care have far outrun the wider market this year, delivering an average total return of nearly 35 per cent versus around 8.3 per cent for the Standard & Poor’s 500.

Shares of animal health testing company

for example, have skyrocketed more than 50 per cent this year, while vet clinic operator is up 31 per cent and pet food maker is up 40 per cent.

“What you see driving that growth is the humanization of pets and consumers’ willingness to spend on their pets very heavily,” said Joe Edelstein, an analyst at Stephens Inc. “Part of that is because pets are part of the family.”

Edelstein follows Blue Buffalo and rival which is up 25 per cent in 2016.

Last year, U.S. pet-related spending totalled a record US$60.3 billion, a 3.9 per cent increase over the previous year, according to the American Pet Products Association.

According to the U.S. Bureau of Economic Analysis, U.S. consumers’ spending on their pets rose five per cent in inflation-adjusted terms last year while overall consumer spending rose 3.2 per cent. It marked the fourth straight year that growth in spending on pet services and products exceeded growth of consumer spending overall.

Blue Buffalo and Freshpet are representative of the success of pet food, the industry’s leading source of revenue.

“We see continued growth of ‘better-for-them’ pet food products in both cat and dog,” said Phil Terpolilli, a Wedbush Securities analyst. “Adoptions in U.S. dogs continue to grow meaningfully.”