Tags: jim cramer | pets | investing | cnbc

CNBC's Cramer: 'Humanization of Pets' Is Greatest Investing Theme Right Now

(AP/Mark Lennihan)

Tuesday, 10 January 2017 09:50 PM

CNBC's Jim Cramer has always said that the humanization of pets is one of the greatest investing themes out there.

To be sure, candy giant Mars Inc., facing a slowdown in packaged food, made a big bet on a booming industry: pet care. The maker of M&Ms and Snickers agreed to buy the animal-hospital chain VCA Inc. for about $7.7 billion -- not including debt -- expanding on its existing veterinary-care business. Mars will pay $93 a share in cash, a 31 percent premium to VCA’s January 6 closing price of $70.77.

But Cramer doens't think this will start a trend.

"I don't think the other companies in the space are takeover targets, although I do think that Idexx can work its way higher over time," the "Mad Money" host said.

As pets have moved from the basement to sharing the bed with their owners, spending has increased in the category. U.S. households own 77.8 million dogs and 85.8 million cats, CNBC reported.

Pet care tends to be a cash business, so business owners don't have to deal with reimbursement from the government. There also aren't a significant amount of large scale companies with extensive exposure to the sector, CNBC explained.

The top players are Idexx Laboratories, which does diagnostics for veterinarians, and Zoetis, which was a spin-off of Pfizer and specializes in livestock and pet health care.

Cramer was less enthusiastic about pet food companies because of pricing competition and because of the competition from Amazon.

"If your dog accidentally eats a bag full of M&Ms — the company's largest marquee product — and needs to be taken to the vet, Mars now gets you coming and going," Cramer said.

The acquisition turns Mars into a dominant company in corporate-owned pet hospitals, an area that’s exploded in recent years -- helped by Americans treating their pets more like family members, Bloomberg reported. It also could help bolster Mars’s current pet brands, including Pedigree and Whiskas. At a time when human food isn’t growing as quickly, the deal may make more sense for Mars than buying another snack business, said Ken Shea, an analyst at Bloomberg Intelligence.

“They see growth and they see diversity,” he said. “Why double down on food when it’s not growing that fast?”

To be sure, Newsmax Finance Insider Patrick Watson agrees that the pet-care industry is indeed a shrewd investment.

According to the American Pet Products Association (APPA), US consumers will spend $62.75 billion on pet food, supplies, and services this year.

Even more interesting is the growth curve in pet spending. It’s been rising at the same time as human birth rates have been falling.

The APPA data shows that pet spending in 2007, before the Great Recession, was $41.2 billion. That means the market has grown over 50% since then, far faster than most other sectors of our sluggish economy.

Furthermore, pet spending has grown steadily every year for more than two decades.

(Dollar Photo Club)

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CNBC's Jim Cramer has always said that the humanization of pets is one of the greatest investing themes out there.
jim cramer, pets, investing, cnbc
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2017-50-10
Tuesday, 10 January 2017 09:50 PM
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