Where Spot’s Investing His Money

The stock market’s been doing alright over the last few weeks, but I still can’t escape the view that the longer-term trend is down. Even though recent gross domestic product (GDP) numbers revealed solid economic growth, I really sense a lack of confidence in the marketplace. Declining trading volume illustrates this reality.

In a market like this, you really need to be highly selective and in no rush to buy stocks. The equities that will outperform over the next few years will have underlying businesses that can withstand higher interest rates and deliver consistent growth. With lackluster investor sentiment, institutional investors will be looking for “safer” companies in which to invest. Luckily, there are a number of investment opportunities that fall into this category.

A few days ago, I mentioned the eye care industry as an investment theme that should outperform over the next several years. Another industry that looks poised to garner significant interest from institutional investors is the pet care industry.

Consider Petsmart Inc. (NASDAQ/PETM), the burgeoning pet care retailer. The stock is up sixfold over the last five years, and the company continues to expect solid growth going forward. How about PetMed Express Inc. (NASDAQ/PETS)? This company is an on-line retailer, selling veterinary products direct to consumers. The company sells pet care items, as well as products for larger animals. It is still at an early stage of development, but it is growing very quickly.

Finally, there is VCA Antech Inc. (NASDAQ/WOOF). This industry powerhouse has the best of both worlds. Not only does this company operate the country’s largest number of veterinary animal hospitals, but it also operates a number of laboratories serving independent animal hospitals. The company makes money selling its services to the entire industry.

Over the next several years, institutional investors are going to want to invest in industries with long-term track records of stable growth. The pet care industry offers an array of investment opportunities with solid prospects. It is an investment theme with long-term staying power, offering a consumer base that is brand loyal and willing to spend premium dollars. Man’s best friend never had it so good.