I Don’t Think Pet Care Investments Will Turn into Dogs

Back in May, I wrote to you about the pet care industry as an attractive investment theme. It’s one of my favorites. At that time, I mentioned PetMed Express Inc. (NASDAQ/PETS), which has turned out to be a top performer on the NASDAQ. This Internet- based pet care company is making money hand over fist. The stock has fully doubled since May.

I also brought to your attention a larger-cap company called VCA Antech Inc. (NASDAQ/WOOF). You can’t help but like this company’s stock symbol! We can only hope it doesn’t turn into a dog — I don’t think it will.

This company operates the largest network of veterinary hospitals in the country, while also selling laboratory services to small, independent veterinary operations. This stock, which is fully priced, continues to tick higher gradually on the stock market.

I remain 100% bullish on the pet care investment theme, particularly because it offers stable growth prospects.

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In a recent BusinessWeek article, the magazine reported some excellent industry statistics. BusinessWeek quoted that the American Pet Products Manufacturers Assn. (APPMA) estimates total sales of pet products for 2005 will top $35.9 billion. This is about double the amount spent 10 years ago. In a mature industry, a doubling of sales every 10 years is very good.

Some 63% of American households own a pet, and 45% own two or more furry friends. More than 43 million households own a dog, and just about 38 million households own a cat. Some 14 million households own fish, with an estimated 139 million pet fish swimming in our homes!

The APPMA estimates that pet food and treats represented about 41% of the total spending in the pet care industry in 2004. Pet supplies and medicine sales accounted for 24% of the market, while veterinary care represented some 23% of spending.

The BusinessWeek article quoted Mr. Michael Souers, an equity analyst at S&P, who expects the pet care industry to deliver a compound annual growth rate of 6% through the end of this decade. This excludes veterinary services and consumer spending through catalogs and the Internet.

Now 6% may not seem like a lot, but, over the years, it adds up quickly! This is exactly what you want to see as an investor. Steady and consistent growth is the mark of real wealth creation.