The ProShares Pet Care ETF — Invest in Every Stage of Pet Care

Pets have been a big part of people’s lives for a long time, but the pet care market has never been bigger than it is now. The American Pet Products Association (APPA) estimated that spending on pets in the U.S. increased from $97.1 billion in 2019 to $103.6 billion in 2020. Additionally, Morgan Stanley sees the sector continuing its impressive growth — it estimates pet spending to more than double by 2030, to $275 billion. Yes, over a quarter of a trillion dollars. And a great way for the average person to benefit from that growth is with the ProShares Pet Care ETF (BATS:PAWZ).

Man is typing on laptop with ginger cat sleeping on keyboard.

Source: Sharomka via Shutterstock

According to data from ProShares, “PAWZ invests in a range of companies that stand to potentially benefit from the proliferation of pet ownership, and the emerging trends affecting how we care for our pets.” It also points out that pet care spending has been on this upward trajectory since 2001 — even through the Great Recession.

What that means is, wherever the growth in this fluffy sector may come, PAWZ is poised to profit.

PAWZ Covers Pet Care from Nose to Tail

Just a glance at the fund’s weighting to different parts of the pet care world shows it is there for every step of a pet owner’s journey. When it comes to the medical health of Fluffy and Fido, it has a 21.1% weighting to veterinary pharmaceuticals, 14% to veterinary diagnostics, 6.4% to veterinary product distributors and 3.1% to veterinary services. And for keeping the furkids happy at home, it has a 11.6% weighting to internet pet supply retailers, 9.9% to pet food makers, 9.3% to pet and pet supply stores and 4% to pet supplies manufacturers.

Moreover, Packaged Facts reported that even despite all the tribulation of 2020, pet ownership in the U.S. is projected to rise 4%. That puts us around 71 million households with at least one pet.

However, it’s important to note this isn’t just a U.S. phenomenon. Fior Markets sees a compound annual growth rate of 6% through 2027 for the global pet market.

Pet Care Isn’t What It Used to Be

Not only are more people owning pets, but they’re also willing to pay more to keep their cats and dogs happy and healthy. Part of the reason the pet food corner is booming is because pet owners don’t want to just feed their pets any old food, they want to feed them healthy, nutritious foods. And many of them are willing to pay a premium to make sure they’re getting the best.

As ProShares wrote, “From the end of 2019 through to the first quarter of 2021, Pet Food and Pet Supplies and Stores were the performance leaders as investors homed in on the boost to their bottom lines seen during the pandemic.”

APPA reported in 2020 that 43% of dog owners and 41% of cat owners prefer splurging for premium pet food.

You might be thinking this is how it’s always been – but the numbers suggest that we’re seeing a real change in how people approach pet ownership. For instance, SPINS found that 69% of Millennials are seeking out natural or organic foods for their furry family members — and most of them say they’re not planning on going back. That compares to about 44% of older respondents.

And they’re being included in family celebrations at an incredible rate as well. According to FINN CADY, more than half of dog and cat owners buy their pets Christmas gifts. Nearly a quarter of them buy special treats or gifts for Halloween. And around half of dog owners and a third of cat owners celebrate their pet’s birthday.

PAWZ Features the Best of the Best

So, what goes into PAWZ? They’re all pet companies, but what else?

PAWZ follows the Factset Pet Care Index. Companies included in that index must either:

  • Mainly draw revenue from one of eight sector subindustries, or
  • Earn at least $1 billion in revenue from at least one of those eight subindustries, or
  • Focus its primary business on pat care even if there isn’t an official subindustry category that fits it yet.

The index uses a “modified market cap methodology” and rebalances monthly, while it reconstitutes annually. It puts a heavy emphasis on companies that meet the first criteria listed above.

For an expense ratio of 0.5%, or $50 per $10,000 invested annually, the PAWZ ETF gives you access to 27 companies. It’s a little top-heavy, with the first five constituents making up nearly half of the fund. But that’s not a huge problem when they’re big names in pet care like Zoetis (NYSE:ZTS), Freshpet (NASDAQ:FRPT) and Chewy (NYSE:CHWY).

Over the last 12 months, PAWZ has returned around 57%, which is well above the return of the S&P 500, as measured by the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). Clearly, these are solid companies that have some oomph behind them.

And if you want to bet on this growing trend, then keep your eyes on the PAWZ ETF.

On the date of publication, Jessica Loder 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. 

Jessica Loder is deputy managing editor for InvestorPlace.com.


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