With such rich diversity in the U.S., Americans can be a difficult bunch to figure out. However, what is absolutely clear is that we almost universally love our pets — and for those that don’t, let’s just say there’s a warm place waiting for you! Seriously, though, the care that we provide for our furry friends sometimes rivals that of our human companions. And this is what fuels pet stocks to buy.
First, you can’t deny the numbers. According to the American Pet Products Association (APPA), pet parents — using the lexicon that many folks prefer — spent a total of $95.7 billion on their four-legged companions last year. That breaks down to $36.9 billion for pet food/treats, $19.2 billion for supplies/live animals/over-the-counter medicine, $29.3 billion for veterinary care and $10.3 billion for other services (which includes boarding and grooming).
Second, American pet parents are incredibly conscientious about what they feed their non-human family members. Steve King, CEO of APPA, stated in a press release that “Consumers are more educated than ever about the ingredients that go into their pets’ food, which means they’re willing to pay more for quality products.” This latter point is really what drives pet stocks, making them great pandemic picks.
Speaking of which, this segues into our third point, the novel coronavirus. As you know, this year has been a trying time for everyone. I can’t think of a single soul — well, outside of the billionaires hightailing it out to safety — that hasn’t been impacted by Covid-19. For us normal people, animal companionship has been a vital coping mechanism, which further bolsters the case for pet stocks.
But outside of this health crisis, you can still depend on this sector to deliver growth and profitability. That’s because millennials are eschewing pets over people, a trend that’s been years in the making. Therefore, if you’re looking for reasonable upside in a worrying period in American society, take a look at these pet stocks to buy.
- Zoetis (NYSE:ZTS)
- Church & Dwight (NYSE:CHD)
- Idexx Laboratories (NASDAQ:IDXX)
- Chewy (NYSE:CHWY)
- FreshPet (NASDAQ:FRPT)
- Lemonade (NYSE:LMND)
- PetIQ (NASDAQ:PETQ)
- PetMed Express (NASDAQ:PETS)
Finally, please note that the pet care industry has another demographic catalyst: Generation Z. Based on an APPA-sponsored survey, about 80% of Generation Z members ages 11 to 17 stated they have a pet in the home. Likely, they will carry this experience into adulthood, which bodes very well for pet stocks to buy.
Pet Stocks: Zoetis (ZTS)
Even if you have a strong conviction toward a particular sector, it’s still important to spread your wagers. Though it’s tempting to go all-in on the speculative stuff, over the long haul, you’re more likely to be rewarded with a balanced approach. And with pet stocks, there’s no better choice for stability than Zoetis.
Once a subsidiary of Pfizer (NYSE:PFE), the world’s largest drugmaker spun off Zoetis, thus becoming not only an independent firm but also the world’s largest producer of medicine and vaccinations for pets and livestock. While the ride in ZTS stock hasn’t always been smooth, it has rewarded patient investors with a confident trek upward.
This was on display again because of the Covid-19 pandemic. On a year-to-date basis, ZTS stock is up nearly 22% as pet owners did whatever they could to keep their four-legged family members healthy and safe. With all that animals do for us, it’s only right that we return the favor.
Church & Dwight (CHD)
Personally, I don’t like cats. There’s only one diva in this house and that would be me. But one of the most important lessons about pet stocks to buy — or for any investment opportunity — is that you need to keep your emotions out of the market. Sometimes, what you hate could very well end up giving you something you appreciate: profitability.
And that’s why I like Church & Dwight. No, CHD stock isn’t going to make you rich. Indeed, I’d classify its shares as the most boring among this list of pet stocks. But what it does give you is exposure to the cat-care market through its Arm & Hammer brand of kitty litter.
Oh yes, that reminds me about the other reason I don’t like felines: that awful, awful smell. But I digress.
The other reason to consider CHD stock is demographics. From data compiled by Statista.com, share of cat ownership among those ages 18 to 29 years and 30 to 49 years is very stable. However, an uptick occurs in the 50 to 64 years category, suggesting aging leads to higher probabilities of cat ownership.
Idexx Laboratories (IDXX)
Although I just stated that investors should keep their emotions out of their decisions for pet stocks to buy, Idexx Laboratories might offer one of those rare occasions to break the rules. As the global leader in diagnostics and veterinary services software, Idexx represents the cutting edge of pet care, specifically preventative care.
We’re all familiar with the emptiness we feel when our companions part ways with us. It’s only then that we start to realize that there’s more to life than furiously punching numbers in a spreadsheet, just so we can move from one end of the penal colony — excuse me, a fine Fortune 500 company — to the other. Idexx helps us extend those memories, which means IDXX stock is perhaps the ultimate feel-good narrative.
Furthermore, it’s very possible that Idexx will enjoy a longer-term benefit from the coronavirus pandemic. That’s because during this year of lockdowns and mitigation protocols, it’s likely that pet owners, particularly millennials, grew even more attached to their pets. That’s a catalyst for IDXX stock you don’t want to ignore.
One of the top online retailers of pet food and supplies, Chewy enjoyed an obvious catalyst due to Covid-19. For one thing, the human component of this special relationship was at great health risk. Therefore, the push toward contactless delivery options benefited CHWY stock. As well, because the crisis doesn’t appear to be abating anytime soon, Chewy has perhaps become the most relevant name among pet stocks.
But CHWY stock also offers a play on the other end of the equation. While the world is mostly concerned about human-to-human transmission, the Centers for Disease Control notes that a risk exists that cats and dogs can be infected with SARS-CoV-2. The available data suggests that the probability is very small. However, you know how pet owners are. Thus, Chewy provides a double benefit.
Of course, when a business is this hot, people tend to find out about it quickly. With so much enthusiasm baked into the share price, I’m more inclined on waiting for a dip in CHWY’s price. Still, if you get that discount, don’t hesitate to smash that buy button.
When you’re strictly assessing FreshPet as a top candidate among pet stocks to buy, it seems like a no-brainer. Set aside that FRPT stock is up over 140% year-to-date, although that is an important factor. Rather, look at FreshPet’s primary business, which is providing pets with premium quality food. As the company’s website boasts, its products feature 100% natural farm-raised poultry, beef and fish, fiber-packed garden veggies and antioxidant-rich fruits.
I know what at least some of you are thinking: I feed my dogs dog food, the kind that you buy by the metric ton and that resembles stale cereal, only with a putrid odor.
Personally, I see both sides of the debate. On one hand, our pets provide so much unconditional love to us. Why shouldn’t we give them what they deserve? But on the other hand, animals do things like smell each other’s hind end, a practice that if converted to human society would get one arrested or worse.
In my opinion, I think people can go overboard with their pet care. But Americans love this stuff, so keep FRPT stock on your radar.
At first glance, you might be confused why I put Lemonade on this list of pet stocks to buy. After all, the company specializes in a convenient manner to acquire insurance via an app underlined by artificial intelligence. Primarily geared toward millennials, the company is best known for its renters’ and homeowners’ insurance. But it’s also pushing its way into the pet insurance game, making LMND stock quite compelling.
As I just mentioned, Lemonade caters to millennials. And that’s important, because millennials have overtaken baby boomers as the generation with the most pets. Not only that, this demographic has really adopted the app-for-everything lifestyle. For instance, millennials typically didn’t invest in stocks as much as prior generations. But along came Robinhood — and the coronavirus, to be fair — and voila! Suddenly, every millennial is a Gordon Gekko wannabe.
Plus, with so many pet stocks moving ridiculously higher, LMND stock provides diversification. If the pet business doesn’t do so well for whatever reason, the rental component should pick up the slack.
Billing itself as an advocate for pet parents, PetIQ offers a vertically integrated business that covers the many essentials for humans to better care for their furry companions, from premium-grade pet products to veterinary services. Further, PetIQ’s branded medications are available through 60,000 retail and e-commerce sites, making this one of the most comprehensive names among pet stocks to buy.
In my view, PETQ stock has serious potential thanks to the underlying VIP Petcare division, which allows PetIQ to offer veterinary services at major retail centers, which include big-box heavyweights Walmart (NYSE:WMT) and Target (NYSE:TGT). Indeed, the latter deserves its own consideration as one of the pet stocks to consider thanks to its pro-pet policy.
I mean, I personally find it nutty, but that just goes to show you how much retail power is coiled up within the pet parent market.
More importantly, when we return to normal — whenever that is — shoppers will really enjoy this one-stop-shop service that PetIQ has created. When you make pet parents happy, good things happen, which is a huge positive for PETQ stock.
PetMed Express (PETS)
Since hitting a high this year around mid-July, shares of PetMed Express fell into a negative trend channel. It’s only recently that PETS stock has started to climb back up, which in and of itself makes it attractive. While the growth narrative for pet stocks is very much real, again, so many people have caught onto it. In other words, good deals are hard to find in this sector.
As well, I can’t help but wonder if there’s some correlation between PETS stock and rising Covid-19 cases. After all, when PETS peaked, that was roughly when the summer surge in cases hit its stride before declining near the end of July. Now, of course, we’re having a ridiculous spike in cases.
With PetMed Express levered to online sales of pet medication and health supplies, could the coronavirus spark the next big rally in PETS? I don’t think it’s out of the question. With so much devastation rippling through the country, everyone now sees firsthand what complacency in a pandemic will do to you.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.