Despite the continually rising costs of veterinary care, food and grooming for pets, not to mention toys and accessories, consumers are still willing to shell out the big bucks for man’s best friend.
According to Forbes Advisor, Americans spent $136.8 million on their pets last year, a 10.68% increase from 2021. This trend is in line with the rise in pet ownership, which has spiked over the last 35 years to where 66% of U.S. households now own a pet. In 1988, only 56% of households had an animal companion.
Further, the American Pet Products Association says total spending in 2023 is projected to reach $143.6 billion.
Based on these trends, the GuruFocus All-in-One Screener, a Premium feature, found companies that manufacture or sell pet food and animal care-related products and are popular with gurus based on 13F filings for the second quarter include Zoetis Inc. (ZTS, Financial), IDEXX Laboratories Inc. (IDXX, Financial), Chewy Inc. (CHWY, Financial), Elanco Animal Health Inc. (ELAN, Financial) and Freshpet Inc. (FRPT, Financial).
Zoetis
With a combined equity portfolio weight of 7.10%, 15 gurus are invested in Zoetis (ZTS, Financial).
The Parsippany, New Jersey-based company, which produces medications and vaccinations for pets and livestock, has an $82.66 billion market cap; its shares were trading around $179.58 on Monday with a price-earnings ratio of 37.73, a price-book ratio of 17.89 and a price-sales ratio of 10.24.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 97 out of 100, the GF Score indicates the company has high outperformance potential. While it received solid ratings for profitability, growth and momentum, the financial strength and value ranks are more moderate.
Of the gurus invested in Zoetis, the Vanguard Health Care Fund (Trades, Portfolio) has the largest stake with 1.01% of its outstanding shares. Frank Sands (Trades, Portfolio), the Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio), the MS Global Franchise Portfolio (Trades, Portfolio) and several other gurus also have positions in the stock.
IDEXX Laboratories
Twelve gurus have positions in IDEXX Laboratories (IDXX, Financial), representing a combined equity portfolio weight of 8.75%.
The company headquartered in Westbrook, Maine, which develops and manufactures diagnostic products for pets and livestock, has a market cap of $37.31 billion; its shares traded around $449.47 on Monday with a price-earnings ratio of 47.71, a price-book ratio of 34.13 and a price-sales ratio of 10.75.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 98 implies the company has high outperformance potential, driven by solid ratings for all five criteria.
With a 2.86% stake, Ron Baron (Trades, Portfolio) is IDEXX’s largest guru shareholder. Other top guru investors include Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Elfun Trusts (Trades, Portfolio), Jerome Dodson (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Steven Cohen (Trades, Portfolio).
Chewy
Chewy (CHWY, Financial) is held by five gurus with a combined equity portfolio weight of 0.95%.
The Plantation, Florida-based company, which operates an e-commerce platform specializing in pet care products, has an $8.32 billion market cap; its shares were trading around $19.33 on Monday with a price-earnings ratio of 161.04, a price-book ratio of 22.74 and a price-sales ratio of 0.84.
Based on the GF Value Line, the stock appears to be significantly undervalued currently.
The GF Score of 72 means the company will likely have average performance going forward on the back of a high financial strength rank and more moderate ratings for the other four criteria.
Baillie Gifford (Trades, Portfolio) is Chewy’s largest guru shareholder with a 3.76% stake. The stock is also being held by Cohen, Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Paul Tudor Jones (Trades, Portfolio) and First Eagle Investment (Trades, Portfolio).
Elanco Animal Health
Holding a combined portfolio weight of 1.71%, six gurus have positions in Elanco Animal Health (ELAN, Financial).
The company headquartered in Greenfield, Indiana, which produces pharmaceutical products for household pets as well as livestock, has a market cap of $5.81 billion; its shares traded around $11.78 on Monday with a price-book ratio of 0.78 and a price-sales ratio of 1.30.
The GF Value Line suggests the stock, while undervalued, is a possible value trap currently. As such, potential investors should conduct thorough research before making a decision.
Supported by high momentum and value ratings and more moderate profitability and financial strength ranks, as well as a low growth grade, the GF Score is 68. This means the company has poor performance potential.
Holding a 17.18% stake, Dodge & Cox is the company’s largest guru shareholder. Elanco is also being held by PRIMECAP Management (Trades, Portfolio), Cohen, Charles Brandes (Trades, Portfolio), Mairs and Power (Trades, Portfolio) and Jones.
Freshpet
Representing a combined equity portfolio weight of 23.28%, five gurus are invested in Freshpet (FRPT, Financial).
The Secaucus, New Jersey-based company, which manufactures specialty dog and cat food under the brand names like Nature’s Fresh, Deli Fresh, Vital and others, has a $3.52 billion market cap; its shares were trading around $73.01 on Monday with a price-book ratio of 3.75 and a price-sales ratio of 5.19.
According to the GF Value Line, the stock, while undervalued, is a possible value trap currently.
The GF Score of 77 indicates the company is likely to have average performance going forward, receiving high ratings for growth, financial strength and value, middling marks for momentum and a low profitability rank.
Jana Partners (Trades, Portfolio) is by far the company’s largest guru shareholder with a 7.51% stake. Fisher, Chuck Royce (Trades, Portfolio), Baillie Gifford (Trades, Portfolio) and Dalio’s firm also have positions in the stock.
Other popular picks
Additional pet companies that were broadly held by gurus as of the three months ended June 30 included Trupanion Inc. (TRUP, Financial), Petco Helath and Wellness Co. Inc. (WOOF, Financial) and PetIQ Inc. (PETQ, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
