This ETF Is A Great Buy Right Now

The relationship Americans have with their pets is, to be honest, strange. Humans have used and lived with animals for thousands of years. Animals, especially the ones we now refer to as pets, were seen as tools for humans to use to help them perform a task better and provide food. Dogs, in particular, have been used for hunting, herding other animals, used as a form of transportation (sled dogs), and used for protection. Dogs lived in 'dog houses' outside year-round; some still do. But, for the most part, dogs are no longer seen as a 'tool' to complete a task.

This doesn't mean dogs and other animals that we let live in our homes no longer serve a purpose because due to the pandemic and lock-downs, we have seen the importance of pets to many people, not only in the US but around the world. The companionship that dogs, cats, and other animals bring to our lives has grown more important over the past 2 years, and that's very clear based on the number from the ASPCA (The American Society for the Prevention of Cruelty to Animals), which show that 23 million households acquired a pet during the pandemic. The ASPCA has also surveyed these pandemic pet owners and found that more than 85% of them are not reconsidering their pet ownership status in the near future. Meaning most of those 23 million new pet owners will remain pet owners for years to come.

Before the pandemic, research suggested that seven out of ten households in the US had a 'pet' in some form or fashion. If those figures are true, more households in the US have pets than have children.

The pet care industry has steadily been rising, even during the Great Recession years, ever since 2001. Many experts point to a number of reasons why this is, with the one that most agree on is that the relationship Americans have with their pets has changed over the last 20 years largely due to a generational change. Millennials, particularly compared to other generations, are waiting longer to have children. But that doesn't mean they haven't still wanted companionship, which for other generations was filled with children running around their homes. So instead of living with children, millennials have opted to have pets running around theirs.

While some people may think this is crazy, the industry has seen more pet owners over the last 20 years, and their owners give more of an interest in the quality of life of their pets. Most studies have also shown that pet owners now, more than ever, see pets as "part" of their family, not just a "tool" that will help make their lives better. And being part of a family means better food, healthcare, and more pampering. This means higher quality pet foods, more pet owners buying medications and taking their pets to vets, and more purchasing of pet toys and accessories.

Another trend on the rise in the past few years is the "doggy daycare" and pet grooming businesses. When dogs and cats lived outside, people didn't spend money getting them haircuts and bathed, and they especially didn't send them to daycare when they went off to work. But now that pets live inside homes, they need to be clean and groomed regularly. They also don't burn as much energy sitting on the couch or laying around the house when owners went to work as opposed to when they lived outside and ran around the yard all day long while they waited for their owner to come home. This is obviously even more prevalent in metropolitan areas where owners live in smaller homes with little to no yards. So, the daycare business popped up a few years ago. But those businesses could see a big BOOM in the coming years as we move past the pandemic and fewer people work from home. Remember those 23 million pandemic pets? How many of them will see their owners go back to working outside the home in the next few years?

Lastly, whether they are pandemic pet owners or millennials who have swapped pets for having babies at an early age, many people don't stop having a pet once theirs gets old and passes away. They have become accustomed to owning a pet and that companionship, so they get another, which continues the cycle of life-long spending in the pet-care industry.

Now, if you are like me and believe this is an industry that has not only performed well over the past 20 years but will continue to do so for the next 20 years, you can invest in it with the ProShares Pet Care ETF (PAWZ). PAWZ is currently the only ETF offered that focuses solely on the pet-care industry. The fund has a middle-of-the-road expense ratio of 0.50%, a yield of 0.21%, which is also not great. But, since its inception back in 2018, the fund has been up 100%, with an annualized 3-year return of 28.47%. The fund primarily focuses on US companies, representing 67% of assets, but has holdings in more than 10 countries. PAWZ currently has 33 positions, with its top ten representing 67% of the fund, but is rebalanced monthly and annual reconstitution.

PAWZ may not be for all investors, but it operates in a relatively safe and stable industry with a lot of upside potential for patient long-term investors.

Matt Thalman
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513

Disclosure: This contributor did not own shares of any investment mentioned at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

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