6 pet stocks and an ETF for animal lovers

The pet industry is booming. In fact, it’s one of the most resilient industries around, seeming to grow regardless of what the larger economy does. The industry generated sales of nearly $124 billion in 2021, up from about $97 billion in 2019, according to the American Pet Products Association (APPA).

The COVID-19 crisis only seemed to accelerate America’s love of pets. People turned to dogs, cats and other animal friends to ease their loneliness during pandemic lockdowns and later. Even before the pandemic, more than 38 percent of U.S. households had a dog, according to the American Veterinary Medical Association. More than 25 percent owned a cat. Overall, 70 percent of American households own a pet, according to a 2021-2022 survey from APPA.

So how can an investor get a piece of this action? You’ll need to dig further than the firms primarily offering food and treats, because these companies are often just one part of a larger conglomerate.

The industry’s resilient growth has made it attractive to the makers of consumer-goods products, and these companies were among the first to ride the pet trend with food and treats. The larger companies in the sector often have subsidiaries focused on pets or pet food:

• Colgate-Palmolive (CL): This consumer goods company produces food through its Hill’s Pet Nutrition business.
• General Mills (GIS): The consumer foods conglomerate owns the Blue Buffalo brand of pet foods.
• J.M. Smucker (SJM): This consumer goods company produces pet foods under the Rachael Ray Nutrish, Meow Mix and Milk-Bone brand names, among others.
• Mars: The privately owned company behind candy bars also produces pet food under its Mars Petcare brand.
• Nestle (NSRGY): The Swiss consumer company owns the Purina brand of pet food products.
• Spectrum Brands (SPB): This smaller company distributes the brands Eukanuba and Iams in Europe and owns many other brands.

But while they own well-known brands, the pet-related products make up only a relatively small portion of their overall sales, often somewhere in the neighborhood of 15 percent or less. So the performance of these stocks relies much more on the rest of the company’s products, such as cereals, toothpaste, jellies, candy, water and more.

Those looking for more “pure play” exposure to the growing pet category may want to look elsewhere, even if many of the companies above have good long-term records.

6 ‘pure breed’ pet stocks for the growing trend

If you’re looking for the “pure breed” exposure to America’s fancy for dogs and cats, then you still have some options, especially those that play up other aspects of people’s relationships with their animals, such as healthcare or toys. Here are some names to have a look at:

1. Chewy (CHWY)

Chewy is an e-commerce play on pet supplies, offering toys, pet pharmaceuticals, supplies and more. It holds an enviable share of the market, and the stock ran up after its June 2019 IPO, tripling its first-day close at one point, before falling back as part of the broader market downtrend.

2. Trupanion (TRUP)

Trupanion provides pet insurance to your animal companions. With the cost of pet care rising, some owners think it’s a great idea to have a policy on a member of their extended family. Only a tiny fraction of pets are insured in the U.S., leaving room for growth, say bullish investors. It’s currently the market leader in what’s expected to be a fast-growing space over the coming years.

3. BARK (BARK)

This company went public in 2021, and it’s known for its Bark Box, a monthly package of toys, treats and more for your dog, though it also offers other canine-themed monthly deliveries. With tens of millions of dogs in the U.S. waiting on the mail carrier to arrive, the company could have some attractive growth prospects.

4. PetIQ (PETQ)

PetIQ offers veterinary services to animal owners, at more than 2,900 locations with retail partners such as Walmart and Target as well as pet healthcare products at more than 60,000 distribution points. The company owns pet brands such as PetArmor and Sentry that can protect the health of your animal.

5. Idexx Laboratories (IDXX)

Idexx is an interesting play on the pet market, offering pet diagnostic tests (think doggy bloodwork), medical instruments and software for veterinary practices. But Idexx also offers testing products for water and livestock, poultry and dairy, among other products.

6. Petco Health and Wellness (WOOF)

With more than 1,500 outlets in the U.S., Mexico and Puerto Rico, Petco covers the map for pet care. The company provides products and services across every dimension of pet ownership, from selling certain types of small animals to food and other supplies to training and medical care. Petco also offers an ecommerce site and mobile app that facilitates the pick-up and delivery of products.

Investing in pet-friendly companies

Investing in socially responsible companies has become quite popular in the last few years, and one area of the market that has garnered more attention recently is pet-friendly companies.

This trend has led people to increasingly search for pet-friendly or “cruelty-free” companies as they evaluate where to put their investment dollars. But it’s tougher than one might think, since many companies test products at least a little bit on animals, or manufacture or sell items that contain animal products. Some organizations rate firms on whether they’re “cruelty free,” but often that means they’re picking companies that have nothing to do with animals (such as banks, insurance companies and consultancies) rather than those that make a direct positive impact on animal well-being.

One ETF that specifically focuses on being animal-friendly is the US Vegan Climate ETF (VEGN). The fund is based on an index that tracks ESG (environmental, social and governance) criteria, and screens out those that harm or test on animals. Its top five holdings (as of Nov. 2022) include UnitedHealth (UNH), Mastercard (MA), Nvidia (NVDA), Tesla (TSLA) and Visa (V).

So the top holdings of this ETF have literally nothing significant to do with pet welfare, but they don’t actively harm animals, according to the criteria laid out by the underlying index.

Bottom line

Americans love their pets, so pet-related businesses should continue to grow — at least in the near future. Investing in this area could reward investors handsomely over time if current trends hold.

If you’re searching out a socially responsible niche to invest in, it can be tough, however. In addition to a fund with companies that do not harm animals, you may want to own companies that actively try to aid their well-being. And that means more legwork and analysis, which can require hours of extra time but this list of best ESG ETFs may help you spot some winners.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.