On Monday, CNBC’s Jim Cramer re-balanced the theoretical, pet care-focused exchange-traded fund he assembled in 2018.
The humanization of pets continues to be a great long-term theme, Cramer explained to viewers. While the fictional Pet ETF, created 10 months ago to track a group of 10 stocks in the pet care sector, is only up 5% since its inception, the famed analyst said that once you get past the market meltdown at the end of 2018, the group is actually up 25% for the year.
“The humanization of pets has been a fabulous secular growth story — one that’s really paid off in 2019,” Cramer said. “And now that we’ve adjusted our Mad Money Pets ETF, I bet it can keep going higher.”
To further optimize the hypothetical fund, Cramer added three new stocks: Chewy, Covetrus (CVET) ,and Elanco (ELAN) . He also deleted two stocks: Pet Med Express (PETS), and Henry Schien (HSIC), and reweighed two existing members: Central Garden and Pet (CENT), and Pet IQ (PETQ). Although the basket of stocks is up about 5% since its August inception, it is outpacing the S&P 500′s 2.6% return in that same span, he explained.
Chewy is a stock that received a lot press recently, as the company released its IPO last week.
On Thursday, Chewy Inc, a subsidiary of PetSmart, priced the initial public offering of 46,500,000 shares of its Class A common stock at $22 per share. It’s currently trading at $36.44 as of 3:25 pm EDT Tuesday.
“The Chewy investment case has aligned with all of the things we know about the industry,” said Simeon Hyman, Global Investment Strategist at ProShares. “The fact that Chewy calls their clients ‘pet parents’ is the best connection between the way we think about the key trends that are driving the pet care industry.”
“I adore Chewy the company, but ideally, yes, I would like to wait for the stock to cool off a bit before I endorsed it,” Cramer stated. “I say we give it a 12.5% allocation. Although, again, if you want to buy it, you should gradually buy it on the way down. But I do sanction buying it a little bit right here.”
Apart from the changes outlined above, Cramer’s “Humanization of Pets ETF” includes six other names, with stock allocations based largely on their exposure to the sector.
For investors looking for an actual pet care ETF, looks to the ProShares Pet Care ETF (PAWZ).
PAWZ is the first ETF of its kind to cater to the pet care industry. The ETF idea tries to capitalize on the pet care industry that is poised for even further growth as data collated from Grand View Research and other pet industry trends show that sales could reach upwards of $203 billion by the year 2025–a growth of 54% in less than 10 years.
At the end of the first quarter, more than half of the components in PAWZ were veterinary pharmaceuticals makers, veterinary diagnostics companies or distributors of veterinary supplies and products. The fund also features some exposure to the retail side of the pet industry with weights to pet stores, makers of pet food and related entities. Data confirm that pet healthcare is big business and a potentially potent long-term theme for PAWZ.
For more investing ideas, visit our Core ETF Channel.