PetSmart, Inc. (PETM): Throw Me a Bone

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The key to consistent long-term investment gains might seem elusive, but it’s probably lurking under your roof right now. No, I’m not talking about charging your kids every time they raid the refrigerator or making your in-laws pay rent when they come out to visit.

Instead, your family pet — be it a dog, cat, or even something as small as a fish — could be your ticket to big investing gains.

You might think I’m nuts, or you may be completely against owning a pet, but, the results from a Harris Interactive poll last year are undeniable that pets are becoming deeply entrenched in American households.

According to the survey, which was conducted last year via an online survey of 2,634 adults, 91% of those who owned a pet considered that pet to be a part of the family — up from 88% just five years prior. As such, many of these pets were entitled to certain perks, including the 67% of owners who admitted to letting their pet sleep in bed with them frequently or occasionally, the 61% who admitted to buying their pet a holiday present, and the 24% who admit to cooking specifically for their pet! I don’t know about you, but I’d certainly love a quarter of my meals cooked for me!

The point here is simple, and especially easy to understand since I’m a pet owner myself: We will do whatever’s necessary to ensure the health, well-being, and happiness of any of our family members. With greater than 60% of American households owning a pet, that represents a treasure trove of growing opportunity for investors.

Throw me a bone
There are a handful of different ways that you can approach investing in this space, in my opinion at least, so I’m not sure there’s actually a wrong way among any of these ideas.

The most logical choice to invest in a burgeoning and ongoing domestication of our pets is by looking into pet superstores like PetSmart, Inc. (NASDAQ:PETM). While online companies like Petmed Express Inc (NASDAQ:PETS) offer the convenience of ordering medications from the comfort of your home, pets — like humans — need personalized care that you usually just can’t get from the click of a mouse. This means that PetSmart, Inc. (NASDAQ:PETM) is bound to stay busy with physical store visits from consumers who want only the best for Fido or their feline. And the proof is certainly in the pudding — PetSmart, Inc. (NASDAQ:PETM) hasn’t delivered an annual revenue decline once over the past decade with total sales up 125% since 2004.

Another great way to take advantage of a growing relationship between pet and owner is through pharmaceutical and diagnostic companies that cater to pets.

Zoetis is a great example of a pharmaceutical play that would make a world of sense. The company’s Slentrol is an anti-obesity pill approved in 2007 to treat chronic weight management issues in dogs. As I highlighted last month, a study by the Association of Pet Obesity Prevention estimates that some 80 million pets (about 55% of all pets) are currently overweight or obese. Slentrol, therefore, could be the perfect way to play this dangerous and growing obesity health risk. Not to mention that patents on pet drugs are generally meaningless since competition is often nonexistent. Most pharmaceutical companies won’t invest the time to make pet biosimilars, which gives existing drugs a very long shelf life.

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