Consumer Confidence, ADP Jobs Disappoint… How To Profit From The $100 Billion Pet Industry Boom
When I returned to the house from the gym the other day, my wife had a concerned look on her face.
“Something is wrong with Sophie,” she announced.
When I asked what the deal was, she simply offered that our dog was “acting funny” and that she thinks “something is wrong.”
Now, I was more than a little skeptical that she would know this, since Sophie is one of our dogs. And even though my wife is pretty intuitive, I was going to need some more information.
When I pressed her, my wife finally blurted out: “Something is wrong with her butt, okay? She keeps scratching it!”
I howled with laughter.
“I’m calling the vet,” my wife said. Of course, I relented and agreed.
If you live in one of the millions of households in the United States with a pet, perhaps you’ve had a similar experience. As any pet owner would tell you, we’ll do just about anything for our dogs and cats.
As I’ll explain later in today’s issue, it turns out this is a huge business that’s growing by leaps and bounds – and one we can profit from.
But first, let’s dive into some recent economic news…
Consumer Confidence, ADP Jobs Disappoint…
Yesterday, we got news that U.S. consumer confidence fell to a six-month low in August.
The Conference Board reported that the consumer confidence index fell to a reading of 113.8 in August, from 125.1 in July. That’s the lowest reading since February – and a far cry from the consensus expectation of 124.
The drop in confidence is being blamed primarily on two things: the Covid Delta variant and inflationary pressures.
The Conference Board’s senior director of economic indicators, Lynn Franco, said: “Concerns about the Delta variant – and, to a lesser degree, rising gas and food prices – resulted in a less favorable view of current economic conditions and short-term growth prospects.”
She also noted in her statement that spending intentions for homes, autos, and major appliances all cooled “somewhat”.
Also worth noting is that consumers’ optimism about short-term business conditions also deteriorated in August. According to the survey, 22.9% of consumers expect business conditions will improve over the next six months, which is down from the previous reading of 30.9%.
We’ll have to keep an eye on whether the Delta variant continues to strain hospitals. That, along with any other renewed mandates from local governments and stretched supply chains, may further dampen confidence and in turn lead to less consumer spending and lower retail sales.
Meanwhile, payroll firm ADP reported this morning that companies are creating far fewer jobs than expected. As CNBC reported:
Private payrolls rose just 374,000 for the month, well below the Dow Jones estimate of 600,000 though above July’s 326,000, which was revised downward slightly from initial 330,000 reading.
That’s potentially troubling, since we should get an official reading on Friday from the nonfarm payrolls report. According to Dow Jones estimates, the report is expected to show an addition of 720,000 jobs, bringing the unemployment rate down to 5.2%.
But before we panic just yet, it’s worth noting that the ADP report has diverged widely from the official nonfarm payrolls report this year.
As we’ve noted repeatedly, the Fed is going to be watching this number closely – as well as how markets react. There’s a chance the ADP report could be an anomaly, but if not, then we could see some volatility as markets react to the report on Friday.
How To Profit From The $100 Billion Pet Industry Boom
I’ll admit it. Even though I’m used to the sometimes-harsh realities of working with livestock on our family land, there’s a big difference between that and dealing with our two dogs at home.
They’re practically family. And as such, most of us know that we will go to great lengths to keep them safe, healthy, and happy.
Now, as investors, we can take a page from the Peter Lynch playbook. Think about the pets in your house (and how much you spend), and you’ll see where I’m going with this…
According to a survey by the American Veterinary Medical Association, about 43 million households own a dog, while close to 32 million households own a cat.
Another survey conducted by the American Pet Products Association in 2019-2020 estimates that about 85 million households own a pet. That’s 67% of households in the U.S., up from 56% in 1988, the first year the survey was conducted.
The APA also estimates that pet owners spent more than $103 billion on their furry friends. That’s an industry record, and a 72% increase over the $60 billion spent in 2015.
As any pet owner can attest, taking care of our furry friends is big business. There are routine visits to the vet, lab work, food, toys and treats, the list goes on… Throw in the occasional boarding costs for a trip – or an unfortunate emergency surgery – and those costs really add up. (And in the case of our house, multiply that by two pets…)
This trend is not showing any signs of slowing down, which means there’s a chance for us to profit…
I’m going to throw out two names for you to consider.
IDEXX Laboratories (Nasdaq: IDXX) is a leading distributor, manufacturer, and developer of diagnostic products, equipment and services for pets and livestock. The company is a leader in the animal space ($61 billion market cap), generating more than $2.7 billion in revenue from three business segments: companion animal group, water quality products, and livestock, poultry, and dairy.
Heska Corp. (Nasdaq: HSKA), is a smaller player with a market capitalization of $2.8 billion. The company primarily caters to veterinarian clinics, offering lab diagnostic and digital imaging equipment along with services, consumables, vaccines, and heartworm preventive products to pet healthcare providers.
There are other ways to profit from this trend, but these two ideas come courtesy of my colleague Jimmy Butts, Chief Investment Strategist of Maximum Profit and Top Stock Advisor.
I encourage you to look into these two names further, as I suspect they’ll be long-term winners. In the meantime, you can check out Jimmy’s latest ground-breaking (and profitable) research right here.