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5 Hot Growth Stocks to Buy With Fido in Mind

These red-hot companies will make your portfolio and your furry friends happy

growth stocks - 5 Hot Growth Stocks to Buy With Fido in Mind

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One of the greatest parts of my life is my miniature dachshund, Blue. She is with me from the start of each day to the end. I would do anything for her and her health — except to over-feed her treats.

I am not alone in this puppy love. Approximately 67% of U.S. households have at least one pet according to the American Pet Products Association (APPA). That amounts to 84.6 million households, up 6.15% from 79.7 million in 2015. And those households — particularly with dogs — consider their companions as members of the family.

How are our furry friends holding up amid the novel coronavirus? Despite economic challenges, pet parents are not skimping on food and care. Harris reported that 68% of parents are making no cutbacks when it comes to their pets — particularly their dogs.

And with so many Americans working from home, dogs themselves are in high demand! Breeders and shelters are seeing interest in adoptions up big.

Spending on pets in the U.S. continues to be a huge number. According to the APPA, spending for 2020 is projected to come in at $99 billion up from $94.7 billion in 2019. This spending includes food, supplies, veterinary care and other things, like grooming.

A collection of companies inside the model portfolios of my Profitable Investing reflects this. The market for pet care is filled with growth stocks that show resiliency — even during some of the most challenging times. If you want to look out for Fido, consider adding these pet-friendly growth stocks to your portfolio right now:

  • Nestle (OTCMKTS:NSRGY)
  • Zoetis (NYSE:ZTS)
  • Merck (NYSE:MRK)
  • Amazon (NASDAQ:AMZN)
  • Covetrus (NASDAQ:CVET)

Pet-Friendly Growth Stocks: Nestle (NSRGY)

Nestle is one of the leading pet food and product companies in the world. Its pet care products — which make up 15.1% of overall sales — are up by 5.25% in just the most recent reported quarter alone.

A chart showing the price action in Nestle (NSRGY) since September 2019.
Source: Chart by Bloomberg

The shares have returned 413% since I added them to the model portfolios of Profitable Investing. Nestle stock continues to be a buy in a taxable account.

Zoetis (ZTS)

Also, in the model portfolios, is Zoetis, which is a class-leading animal health and vaccine company.

Zoetis shines because it has the capabilities to solve major problems — like through providing vaccines for animal-to-human viruses.

Its revenue continues to climb, with the compound annual growth rate (CAGR) running at 5% over the past 10 years. No doubt, Zoetis stock has proven itself to investors.

A chart showing the price action in Zoetis (ZTS) from September 2019.
Source: Chart by Bloomberg

It has returned 56.4% since being added to the model portfolios of Profitable Investing. That return is more than double the return of the S&P 500 for the same recent period of time. Buy Zoetis stock in a tax-free account.

Pet-Friendly Growth Stocks: Merck (MRK)

Joining Zoetis in the pet and animal pharmaceutical products market is Merck. This excellent company is in the Profitable Investing model portfolio focused on monthly dividends called The Incredible Dividend Machine.

A chart showing the price action in Merck (MRK) since September 2019.
Source: Chart by Bloomberg

While animal health is a smaller percentage of its product revenues than human products, Merck still gets 10.1% of overall sales from our furry friends. That portion of its revenue continues to climb — reflecting the market trends. MRK stock has returned 66.4% since being in the portfolio, and it is a buy in a tax-free account.

Amazon (AMZN)

Then we come to company that brings joy to the doorsteps of dogs on a daily basis — Amazon.

This is the company that provides the retail platform for so many pet products, along with the evermore important logistical delivery capabilities that our pets depend upon. How would we make sure Fido had treats, food and toys without one-day and two-day shipping?

Amazon has been one of the stock market stars with a gain of 38.9% since being added in April to the model portfolios of Profitable Investing. It is a buy in a tax-free account.

Pet-Friendly Growth Stocks: Covetrus (CVET)

It is very important to me to keep in touch with my wide collection of friends in various industries. I can call them if I need clarification or confirmation of my thoughts before I present them to you. From time to time, I also get some suggestions.

One of my friends is John Lumbard, the founder of Lumbard & Kellner, an investment management company in New Hampshire. He and I recently were discussing the markets, including Zoetis, and he drew my attention to a company that I was not familiar with: Covetrus.

The origin story for the last of my growth stocks starts with a 1932 Columbia University College of Pharmacy graduate by the name of Henry Schein. His company, under the eponymous name of Henry Schein (NASDAQ:HSIC), continues today serving healthcare and dental practitioners.

His son would continue on his work and later others would lead the company, but the model stayed and expanded. And eventually, Schein acquired Butler Animal Health, which quickly became one of the largest veterinary products and service providers in the market. And after building the vet market and acquiring other firms, Schein spun off the animal health company and merged with Vets First Choice to form Covetrus.

Covetrus Keeps Vets Healthy

So how does it work? It is all about providing vets with the products and services they need. Covetrus then builds the relationships to help vets thrive and the company succeed.

It starts with supplies. Just like for dentist or doctor offices, vets require all sorts of items. Covetrus provides needed goods on a continuing basis, also making it easier for vets to place additional orders. Larger-ticket items like sonogram machines to examination tables come with leasing and financing terms, both for standalone offices and expansive chains.

Next, Covetrus drives its growth through software. Vets use software to manage appointments and handle marketing and communications. And just like human health records, offices are digitizing the records of our furry friends. Covetrus provides the systems and keeps information secure.

Lastly, one of its more lucrative services is prescription medications. Thanks to the developments by the likes of Zoetis and Merck, animal treatment products continue to expand. Covetrus continues to develop better and more competitive delivery of those products.

The company has its own pharmacy and formulary facilities that maintain the highest industry standards for drug manufacturing under various licenses. It makes sure that vets always have what they need on hand. And for additional or special drugs, Covetrus has its own logistics systems with one-day or two-day delivery.

Covetrus not only makes things easy, it still helps pet parents save money. Clients get cheaper products and swift delivery, and vets make some revenue. I have seen this process in action, and I appreciate that it saves me money and time, and also ensures Blue gets what she needs.

Covetrus Serves Shareholders

Revenue across its three primary business units continues to advance. Since the consolation to form Covetrus and listing of the company, revenues are climbing by 23.7% on a CAGR basis.

Source: Chart by Bloomberg

The company continues to evolve from the spinoff and merger, so costs are still a challenge along with the competitive pricing for its services.

But it has lots of cash with its current ratio showing coverage of 160% of its liabilities out one year alone. And its debts are low for its segment in the medical marketplace at only 37.9% of assets.

The stock is very inexpensive as it is priced at a discount to sales by 40%. And all of the business assets that the company has a history of making the most of are only valued in the stock by 1.95 times its intrinsic value.

The stock was down leading into 2020 as being a smaller-cap stock, it hasn’t yet built up its following in the financial markets. But on a year-to-date basis the shares are beginning to get noticed. Covetrus has returned 67.1% — soaring well above the S&P Small Cap Index’s loss of 11.5% and the S&P Small Cap Health Care Index’s return of 2.4%.

A chart comparing the performance of Covetrus (CVET) to the S&P Small Cap Index and the S&P Small Cap Healthcare Index.
Source: Chart by Bloomberg

Covetrus, S&P Small Cap & S&P Small Cap Health Care Indices Total Return 

The shares do not yet pay a dividend, but this has the potential to change. For now, I see that this is a bargain way to further your investment in a very bullish market. Buy it now in a tax-free account.

On the date of publication, Neil George did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

As the editor of Profitable Investing, Neil George helps long-term investors achieve their growth & income goals with less risk. With 30-plus years of experience in the financial markets, Neil recommends undiscovered and underappreciated companies that offer subscribers double-digit yields now and triple-digit returns over time.


Article printed from InvestorPlace Media, https://investorplace.com/2020/09/5-hot-growth-stocks-buy-for-fido-pet-stocks/.

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