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ProShares Pet Care ETF (Ticker: $PAWZ) - Brief Breakdown
For the full article check it out here.
Company Description and Qualitative Analysis
ProShares Pet Care ETF $PAWZ sets to track the performance of the FactSet Pet Care Index. Currently approximately 70% of US households have pets. Every pet requires food and various items for care that are sold by holdings of ProShares. The pet industry is rapidly growing and is projected to exceed $350 billion by 2027 and has grown every year including during the 2008 financial crisis. In this ETF there are holdings that cover every aspect of pets to give investors exposure to everything from pet food to pet insurance.
Quantitative Analysis
At the time of this writing (5/15/2022), PAWZ is trading at $54.31 with a 52 week range of $51.58 - $82.24. The top 10 holdings of PAWZ are IDEXX Laboratories Inc (10.37%), Zoetis Inc (9.61%), Dechra Pharmaceuticals Plc (9.40%), Freshpet Inc. (7.17%), Chewy Inc.-Class A (6.00%), Trupanion Inc. (4.88%), Petco Health & Wellness Co. Inc. (4.88%), Nestle SA (4.58%), Merck & Co. Inc. (4.45%) and Pets At Home Group Plc (3.84%). This financial analysis was done using financialstockdata.com (sign up using our promo code GCI to get one month free here). You can view PAWZ holdings here.
Bullish Thesis
Here are three points to support the bullish thesis updates:
- Every Part of Pet Industry: In the pet industry there are many different sectors that you will get exposure to. I see this as a positive (and a negative, so check out why below) because outside of the generic pet food and supplies company that has the potential to grow simply on the fact that pet ownership increases there is not a clear path for other aspects of the pet industry. For pet insurance to pet care companies, I do not see a clear path for this portion of the industry to boom but that does not mean it cannot boom. Pet ownership is fluid and the way pets are treated has become increasingly better across the globe so new aspects of pet ownership can pop up that have yet to take off just yet.
- Pet Ownership Growth: As mentioned in the description/qualitative analysis, 70% of households in the US own pets. The percentage of households with pets is higher than the percentage with children and that gap is widening. More people are treating their furry friends as children and spoiling their pets more so than previous generations. If this trend continues, the pet industry will continue to be very success and there may be more companies that pop up and have products that can help with your pets.
- Always a need for pet care: No matter how you look at the pet industry, there will always be a need for pet care and pet products. There will be no escaping veterinary trips, buying pet food, water bowls, crates, and other items that are seemingly required to care for pets. As more people get pets, more care will be needed. Pets are not going anywhere and neither is this industry for the time being.
Bearish Thesis
Here are three points to support the bearish thesis:
- Potential Lack of Growth in Recession: Spending on pets is an interesting sector of consumer goods because with the pet boom and a lot of new pet owners it will be interesting to see how spending habits of these new pet owners will react during an economic downturn. Many millennials lived through a financial crisis but most were not yet working during that time, so it will be new territory for many in the workforce to figure out how to go about budgeting and spending during an economic downturn. Spending on pets seems like an obvious area to minimize costs when food and everyday things that people need to live get increasingly more expensive.
- Over diversification in Pet industry: The pet industry has various sectors that the ProShares ETF has exposure to but there may be only a certain aspect of the pet industry that takes off. For example, potentially the pet insurance becomes a necessity and more and more pet owners begin to have pet insurance, which would make that sector of the pet industry take off. For the sake of simplicity, another portion of the industry such as pet food and supplies does not grow because pet ownership decreases and instead of just benefiting from the success of the pet insurance industry, you are exposed to the pet food and supplies industry which cancels out the success of the pet insurance industry.
- Limited Growth Potential: The pet industry is not like a growth or tech stock where you will see large booms and massive returns. I view the pet industry as a steadily growing industry that will continue to grow. As this industry continues to grow so will the companies associated with it. This industry relies on consumers spending on their pets and getting pets, therefore the growth is not something that is required out of necessity or for work purposes but simply for quality of life.
For the full article check it out here.
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ProShares Pet Care ETF (Ticker: PAWZ) - Brief Breakdown
In my Brief Breakdowns,I pick a stock and present opposite sides – I present the bullish argument and the bearish argument.
Lots of love for the pet industry recently. Thanks for putting this together. Nice to know there is an option for an ETF out there to get exposure to the industry. My $CHWY pick isn't doing so hot 😅
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