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Chewy stock may be near an all-time low. But one money manager thinks that another stock for animal lovers could be a great buy right now. The pet industry is an example of a long-term megatrend.
As I type this, one of my two cats is sitting on top of our dryer. I think he’s chasing/trying to eat a small bug. This little floof — as my wife lovingly refers to him — along with his “sister” has been a wonderful addition to our family. We spoil the two felines as if they were actual human children.
We’re not alone. Pet care is a big booming business. And that’s one reason why a top institutional firm thinks that Idexx Laboratories, a company that makes diagnostic testing kits is a great long-term buy.
Hans Peter Portner, head of thematic equities for Pictet Asset Management, said his firm likes Idexx because it is a “resilient” business with a “persistency of earnings.” He joked that many people are “irrational when we deal with pets.”
In other words, animal lovers won’t think twice about spending (often out of pocket if there’s no insurance) when their furry friends are sick. (Says the guy who had to get drops, ointment and a cone for the little floof when he had an eye infection/virus shortly after we adopted him last year.)
Portner said Idexx is a great example of a strong company benefiting from a long-term macro trend of people having more pets. (Don’t tell that to investors in Chewy though. The stock is now trading near an all-time low. Although Chewy’s woes may have more to do with stiff competition from Amazon, Walmart, Petco and other retailers,)
“If you don’t follow social variables in investing you are making a mistake,” Portner said, echoing the old Fidelity/Peter Lynch “buy what you know” strategy for owning stocks.
Idexx is just one company that Portner identified as a beneficiary of a macro theme. Speaking at a media luncheon at Pictet’s New York offices Monday, Portner noted that his firm looks for so-called “megatrends” and tries to identify companies with exposure to them.
Some other examples? Insulation maker TopBuild, thanks to continued long-term strength in housing; Dutch chip maker ASML, which is benefiting from a renewed “reshoring” effort as companies seek to reduce their reliance on China for tech manufacturing; and California Water, as local and state governments push for more safe water for drinking, cooking and cleaning.
Interestingly, Portner is not as bullish about two other trends that are getting a lot of attention in the investing world, in part due to Elon Musk. Portner said electric vehicles are not a megatrend. He argues that hydrogen power companies might be a better investment than electric vehicle firms and also noted that a global urbanization push may make electric vehicles less popular in big cities.
Portner isn’t investing in space exploration either. The reasons? Many of the top companies, such as Musk’s SpaceX, are private. Portner also noted that public defense companies with exposure to the business of space tend to be weapons makers/military contractors. So he “won’t touch” them.
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