Pet Company at the Top of the Pack

Wow! I love thinking about investment themes. For me, I like to get my head around a solid economic trend and then seek out the best related investment opportunities.

Long-time readers of this column will know of my affinity for the pet care industry. It is an investment theme that I wrote about extensively in 2005 and is really turning out to be successful.

One really interesting company, VCA Antech (NASDAQ/WOOF), has been a solid performer in 2005, but the financial news just came out on a real winner, PetMed Express Inc. (NASDAQ/PETS).

This company once again reported excellent financial growth, and the stock has more than doubled over the last year. PetMed Express was founded in 1996, and is an online pet pharmacy delivering prescription and non-prescription medications to large and small animals through its 1-800-PetMeds toll free number and its Internet web site.

The great thing about this company is that it is not a complicated business. People have pets and pets need flea and tick medication on a yearly basis. Most pet owners purchase the same product year after year for their pets, so why not buy them through a wholesaler that delivers the product right to your door. It just makes sense!

The only people you can imagine who don’t like this direct-to- consumer concept are traditional veterinarians. The reason why is that traditional pet products like flea and tick medications are marked up considerably at veterinary clinics. Little pills in small cardboard packages are very profitable. Veterinarians love animals, but they also want to make money from their business.

You have to admire innovation in business. Innovative companies like PetMed Express really can create a lot of wealth for the economy and for stockholders. PetMed Express took a traditional business, innovated, and made the entire industry better for consumers. You just can’t argue with that.