When cuddling our furry, feathered and scaly companions, it can be hard to fathom that there’s a $100 billion industry across a variety of sectors supporting their spoiled rotten lifestyles. That’s why ProShares created the ProShares Pet Care ETF (NYSEARCA:PAWZ). The PAWZ ETF invests in a collective of industries range anywhere from e-commerce to healthcare to food and goods our pets need.
Petcare has long stood apart from industries oriented towards humans — real estate, food and service — while still functioning as miniature versions of those sectors.
No, a dog isn’t buying a house. No, birds don’t book flights to Hawaii. And no, cats do not buy kitty treats like candy — okay, well maybe cats do that. The point is pet care has become a booming industry, and it’s becoming bigger.
The Case for Pets
Pet owners often want what’s best for their pets. Whether it’s a massive tower and organic fancy feast for cats, or full raw meals for our dogs (here’s Gohan the Husky scarfing down a raw meat patty via We Feed Raw), as our lives improve, so do our pets’ living standards.
Consider pet healthcare, for example. Veterinary practices are both incredibly difficult and expensive to maintain. According to Grand View Research, the veterinary medicine market was valued at $29.2 billion in 2020. They also estimate within the next eight years, the sector will grow by a compound annual growth rate (CAGR) of 7.4%. Don’t forget about the massive cattle and dairy industries in America, which are also growing.
And think about how much pets have become a daily part in our lives. Even if you don’t personally own pets, there’s a good chance you’ve interacted with media about other peoples’ pets. Seemingly, among serious topics such as politics, environmental concerns or news about international conflict, we can all come together and agree that pet videos are pretty cute.
Take “Grumpy Cat” for example. The viral feline known for a permanent stinkface had an estimated worth of about $100 million in 2014. Fast forward seven years to 2021, and an NFT of the image sold for more than $180,000.
Cute pets command our attention; on the Internet, that’s money. There are thousands of “pet influencer” accounts on social media that act as brand ambassadors for companies to sell pet products. Depending on popularity, that can go out to millions of people. That means not only are pet industries growing, but there’s an opportunity in e-commerce, social media and direct-to-consumer sales for companies to make serious gains.
What Did the Pandemic Do to Pet Care?
As with all things, the pandemic also drastically altered pet care. Pet adoption rates skyrocketed during the pandemic. According to a recent study in Frontiers in Veterinary Science, Internet searches related to pet adoption for both cats and dogs increased by 250% over the first year of the pandemic.
As a result, the American Pet Products Association (APPA) reported numerous milestones for pet care. Standout numbers included the American pet industry exceeding over $100 billion in value, with an expected 5.8% growth on top of that for 2021.
While the pandemic shuttered brick and mortar shopping, the APPA said pet retail actually increased across all metrics, with total retail sales increasing by 6.7%. Unsurprisingly, e-commerce increased by an impressive 47%. The APPA also reported 30% of pet owners said they spent more on their pets, with only 10% of respondents reporting spending less.
Hitting Pause on the PAWZ ETF
The PAWZ ETF concentrates on a very niche market that investors surprisingly overlook. Over the past two years, PAWZ has nearly doubled in value. And year-to-date, it’s grown 14%, not bad for an ETF. Even better, ProShares estimates the global pet care industry could exceed $350 billion by 2027.
The PAWZ ETF tracks the FactSet Pet Care Index and has 32 holdings. The top sector in the ETF is veterinary pharmaceuticals at 22.43%, followed by other at 20.77% and Internet pet and pet supply retail at 13.74%.
The fund is primarily invested in U.S. companies, representing 67.75% of holdings, with the United Kingdom in second at 15.78% and Switzerland in third with 4.53%.
Almost two-thirds of the fund is allocated to the top 10 holdings, including Zoetis (NYSE:ZTS) at 10.11%, Idexx Laboratories (NASDAQ:IDXX) at 9.99%, Dechra Pharmaceutical (LSE:DPH) at 8.98% and Chewy (NYSE:CHWY) at 8.04%. These top holdings have all been on massive tears, gaining at least 80% or more in the past two years, with e-commerce platform Chewy being the biggest winner, gaining about 224% more or less since the pandemic started.
The PAWZ ETF sports an expense ratio of 0.5%. Every $10,000 invested translates to a cost of only $50.
What sets the PAWZ ETF apart from most other ETFs is how it approaches thematic investing. Most ETFs focus on one industry or sector. PAWZ has a different thematic approach, instead opting for industries that support pet ownership, which can differ greatly.
The benefit is the PAWZ ETF is incredibly diverse — it’s very unlikely headwinds in one industry can affect others, making it fairly resilient while also capitalizing on a fast moving growth market. This makes PAWZ truly a one-of-a-kind ETF.
On the date of publication, Peter Olin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Peter Olin is an assistant editor at Investor Place.