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Investing in pet stocks
Our new four-legged WFH coworkers hit fast-forward on pet market growth in a big way.
As more Americans become pet owners, a promising trend has begun to emerge. Here’s what you need to know about the rising pet market and how to capitalize on its potentially high growth potential.
What are pet stocks?
Pet stocks belong to companies that manufacture the goods and technologies that support the pet industry. Major players in this category include Chewy, Freshpet, IDEXX Laboratories and Zoetis.
What subcategories does it include?
A variety of subcategories comprise the pet industry, including:
- Pet food manufacturers
- Pet insurance providers
- Pet supply retailers
- Veterinary diagnostics
- Veterinary pharmaceuticals
- Veterinary services
How to invest in the pet sector
Interested in backing the pet market? Here’s how to add pet market stocks to your portfolio:
- Pick an investment platform. Explore your account options by comparing research tools, platform features and applicable trading fees.
- Open an account. Fill out an account application and link an external bank account to fund your portfolio.
- Select your securities. Pinpoint stocks you’re interested in by searching for company name or ticker symbol.
- Submit your order. Complete your order by indicating how many shares you’d like to purchase and selecting the type of order you’d like to execute.
- Monitor your investments. Track the performance of your investments from your brokerage account.
What stocks are in the pet sector?
As competition heats up in this emerging market, we’re likely to see more companies going public. But there are also plenty of established pet stocks to consider:Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn't include every stock available.
What ETFs track the pet sector?
If you’re seeking a pet-focused ETF, look into the ProShares Pet Care ETF (PAWZ). This ETF tracks 27 stocks across the pet sector, including Chewy, Trupanion and Zoetis. Stocks are spread across a variety of veterinary pharmaceutical companies, pet supply retailers, pet food manufacturers and more.
Outside the ProShares Pet Care ETF, there aren’t many funds that focus exclusively on pet stocks — although this may change given the rising volume of interest in the industry.
Why invest in the pet sector
As first-time pet parents joined the already growing ranks of US pet ownership in 2020, we saw a lift in an already noteworthy trend: increased spending on pets.
According to a 2019 to 2020 pet ownership survey conducted by the American Pet Products Association, 67% of US households own a pet. And this level of widespread pet ownership translates to hefty pet care spending.
In fact, when it comes to e-commerce sales, pet care is the second-largest consumer packaged goods market in the US, according to Statista. From 2016 to 2018 alone, US households purchasing pet products swelled by over 5 million. That’s a heck of a lot of squeaky toys.
In 2019, the US pet care market was worth $95.8 billion, reports Global Market Insights. And that market is expected to experience a 5.9% compound annual growth rate (CAGR) from 2020 to 2026 — a trend fueled by pandemic-induced pet acquisition.
Numerous news outlets, including CNBC, The Washington Post and USA Today, delivered 2020 reports of the collective emptying of local animal shelters as Americans opened their homes in droves to the kinship of new furry, four-legged family members.
The bottom line? The pet care industry is on the rise.
What unique risks does the pet sector face?
Any sector poised for rapid growth will be rife with competition. And the pet industry is no exception.
The way we shop and care for our pets is changing. With the migration to e-commerce that took place during the pandemic, businesses found themselves facing a sink or swim dilemma — and many didn’t survive.
The question is: how will the transition affect the way we provide for our pets in the coming years? It may be too early to say, but one thing remains clear: pet ownership is on the rise and high growth potential means steep competition.
Smaller and more affordable companies to invest in may not make it. Well-established stocks may become too pricey to purchase. All investments carry risk, but those that belong to a rapid growth industry like the pet market can be especially volatile.
The pet sector is thriving but isn’t without its risks. Namely: this industry is in a transitory growth period and high competition can trigger volatility.
To invest, you’ll need a brokerage account. Review your platform options with multiple providers to find the account that best meets your needs.
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