Pet stocks lead the pack
Companies keying on animal love are best in show for high returns
These stocks are no dogs.
With people spending like never before on their animal companions, stock watchers have been betting on big returns from pet stocks.
The Pet Passion index, a tracker created by Motif Investing that follows pet-related companies, has returned 19 per cent over the past year as of Thursday’s stock market close, sprinting well ahead of the rest of the stock market pack.
The S&P 500 Index has only marked an 8.5-per-cent gain so far this year.
Among the best in show is pet pharmacy PetMed Express Inc., which has seen its shares nearly double over the past year. Trupanion Inc., which offers pet health insurance, is up about 44 per cent in that span, while IDEXX Laboratories Inc., a veterinary-diagnostics company, has gained about 30 per cent.
An improving U.S. economy has encouraged pet adoptions and loosened up the wallets of people who already have one, analysts say. Another factor: younger adults are putting off having kids, but are making room for a dog or a cat.
“Americans sometimes take care of their pets better than they take care of their own health,” said Mark Massaro, an analyst at Canaccord Genuity Inc.
Pet-related spending south of the border is estimated to exceed $69 billion (U.S.) this year, up from about $60 billion in 2015 and nearly double its level in 2005, says the American Pets Products Association, an industry trade association. About 90 per cent of the estimated 2017 spending is on food, supplies and pet health care.
Walking a friend’s dog through Central Park on a recent Wednesday, Lisa Alonso Vear, 39, of Brooklyn, quickly whipped out her smartphone to show pictures of her 12-year-old dachshund, Rochester, the way a young mother would normally show off her newborn.
Vear works at an animal hospital in Brooklyn and said she’s seen an uptick in vet visits — especially routine checkups.
“You’re going to spend money on yourself, but people care a lot about their pets and care for them and make sure they’re healthy,” she said.
About three in five millennials own pets, according to APPA research, compared with about 50 per cent of the general population. Meanwhile, birth rates among women in their 20s have dropped more than 15 per cent, according to the most recent data from the Urban Institute, a Washington-based think tank. “Millennials have officially taken over as the pri- mary pet-owning demographic and live out the belief, more than anyone, that their pets are not just pets, but members of their family,” said Andrew Darmohraj, the pet-products association’s chief operating officer. “They are willing to spend the money to ensure their pets are very much integrated into their lifestyles.”
Paul Columbia, the owner of a New York City-based dog-walking business, has seen the pet boom close up. He says that his venture has grown from a one-man operation in 2001to 10 employees now going on about 30,000 dog walks a year.
“People are delaying having children and, as a result, their pets become their children,” Columbia said.
The debate around health care for humans, and the uncertainty that has created for many businesses, also make pet stocks look like a relative safe haven, one analyst said.
“They’re a very attractive investment for people who want to wait on the sidelines until the health-care debate shakes out,” said David Westenberg, an analyst at CL King & Associates. “You know what it’s going to look like.”
Investors like the pet market because they can relate to it, said Kevin Ellich, an analyst at Craig-Hallum Capital Group and owner of a 13year-old wheaten terrier named Ace. Ellich said the industry trends are positive and, with furry friends continuing to feel the love, the expectation is shares will continue to grow. “You probably need a recession to knock down this consistent growth,” said Ben Haynor, an an
alyst at Aegis Capital Corp.
“Millennials have officially taken over as the primary pet-owning demographic and live out the belief, more than anyone, that their pets are not just pets, but members of their family.” ANDREW DARMOHRAJ CHIEF OPERATING OFFICER PET-PRODUCTS ASSOCIATION