Sometimes, a big investing theme is right in front of us, so much so that we almost step in it.
I am reminded of that every time I leave or return to my apartment. It seems as if I am the only one in the whole building without a pet.
I’m just not a pet kind of guy. I also travel frequently and work long hours, which makes it more difficult. Still, if everyone else wants a pet, I am very open to making money off of the companies that are profiting from the obsession with little (and sometimes big!) animals.
And I do mean obsession. Not only do I see pets everywhere, but they seem to be living better lifestyles than most humans!
I know pets have been around forever and may not seem NexGen, but trust me, there is already a lot of money being made here. Americans spend more per year on their pets than they do on men and boys clothing and alcohol, according to the Bureau of Labor Statistics. Does that surprise you?
This trend really gets interesting when you throw in the millennials, one of my top mega-trends that investors simply can’t afford to ignore. There are more millennials than Baby Boomers, and they are getting ready to take the economic spotlight as they flood the workforce, start families and enter their prime earning years.
Millennials love their pets even more than previous generations. Three out of four Americans in their 30s have dogs according to research firm Mintel, much higher than half of the population overall. They also spend more on them. Another survey (from Wakefield Research) showed that 76% of millennials are more likely to “splurge” on their pets than themselves – toys, treats, custom beds, even clothing and strollers. And did you know that pet health insurance is one of the fastest-growing employee benefits?
It’s no wonder that three of the pet stocks I follow just recently reported blockbuster earnings, confirming our view that this is a place to make money.
PetMed Express (PETS) is America’s largest pet pharmacy through its 1-800-PetMeds website and toll-free hotline. The company sells both prescription and non-prescription drugs. The fourth quarter was great and blew away earnings estimates with 38% growth to $0.37 a share, way ahead of expectations for $0.26. Revenue grew 14% to $63 million, also well above analysts’ estimates of $56.3 million. Result: The stock rallied 25% on the news to a new all-time high.
Freshpet (FRPT) makes natural, refrigerated pet foods. This company also beat their earnings estimate (by $0.02) but missed on revenues. Still, the stock jumped on the 10.4% increase in the number of Freshpet Fridges in stores, which now stands at 17,031. Gaining retail space is the number one priority of a growing consumer product company, and FRPT is achieving that metric. Result: The stock rallied to a new 18-month high on the news and has gained 27% in just the last month.
Zoetis (ZTS), which is a leading animal healthcare company, also rallied on an earnings beat. The company bested estimates on both the top and bottom lines and reaffirmed 2017 earnings guidance. Result: The stock rallied to close out last week at its best level ever and is up 13% in the last month.
Phibro Animal Health (PAHC), another animal health and nutrition company, was a similar story after reporting earnings on Monday. Result: The stock gained 13% over the next two days and made new 52-week highs.
The bottom line is that investing in pets is a NexGen theme that cannot be ignored. These companies all have strong fundamentals, which is one of our three core areas of analysis, and you can see the results.
In fact, we talked last week about a company in NexGen medicine that is a leader in virtual doctors’ offices and telehealth. That company also just reported outstanding earnings and surged 25% on Tuesday. That’s the power of NexGen investing. (You can learn more about that name as well as my other recommendations with your no-risk Charter Membership. That offer is about to expire, so if you’re interested, please don’t wait. You can find out more information here.)
And keep your eyes open. You may be able to spot a powerful NexGen trend, too!