How to Profit Off Your Pooch

By Joel Reese, WeSeed

The recession has hit almost everyone pretty hard.

Wait, scratch that — it’s hit almost every person hard. Dogs, cats, and other pets are doing quite well these days.

Americans will spend roughly $45.4 billion on their pets this year, estimates the American Pets Association. (That’s up $2.2 billion from last year, the group notes.)

And this goes beyond your dog’s Derm Care Anti-Bacterial Medicated shampoo ($14.99), or your cat’s argyle sweater ($35), or your dog’s hand-painted blue dress with strawberries ($59.95). We’re talking doggie spas, pet insurance, veterinary bills that make your elective appendectomy look cheap, and things like this German custom-built cat condo ($1,034).

Meanwhile, just for fun, we’ll note that luxury store Saks Fifth Avenue (SKS) posted a 15 percent sales loss compared to last year, which is pretty much the standard trend in retail.

So enough about that — which companies will profit from people’s peculiar pet preferences? To my mind, this brings to mind another axiom: If you want to strike it rich during a gold rush, invest in picks and shovels. The point: So who services pets?

The first company that comes to mind is PetSmart (PETM) — you’d think that stock would be shooting through the woof, right?  At first, it seems the company is barking up the wrong tree. Even though the market’s dog days are starting to turn around, the stock has gone from $35 per share last year to about $21 per share today. (Ok, I’ll stop with the pet puns. It’s just so doggone tempting!)

But according to this Motley Fool story, PetSmart is actually doing pretty well: earnings were up 4.6 percent last quarter, and sales were up some 5 percent. So even though other companies are trying to creep into the pet market — Amazon (AMZN) and Target (TGT) come to mind — PetSmart is still a player here.

If PetSmart’s numbers frighten you, there are other companies taking advantage of this four-legged friend fervor. PetMed Express (PETS), which sells prescription drugs for Fido and friends, is at around $18, up from $11 a little over a year ago. The company’s ROC (return on capital, which is basically a way to tell how effectively a company is using its money) is a strong 31 percent over the last three years, and they tap into a potentially burgeoning market: The company can undersell vets via their 1-800-PETMEDS, who aren’t usually interested in passing along bargains to pet owners.

Then there’s Patterson Companies (PDCO), which makes veterinary supplies, is at $27 per share, up from below $17 just a few months ago. The Minnesota-based company has seen an increase in sales and gross operating profit over the last four years.

The lesson here: follow the crowds, and right now the crowds are making their pets happy. So maybe you should put your money where your leash is and let Fido guide your finances. Just a thought.

image by Tobyotter

Target’s Board Is in the Crosshairs

by Carlos Portocarrero, WeSeed Writer

Let’s say you’re a big fan of Target (TGT). You love their stores and you love their prices. You also think the people in charge of the company are doing a great job, so you buy some stock because you want to get in on their action.

Then you decide it’s not enough—you want to make it even better. So you start a petition to change some of the people on the board of directors.

Why? Because you think some fresh blood would do the company good.

That would make you this guy: William Ackman. Ackman’s Pershing Square Capital Management owns over $1 billion worth of stock, which makes it one of the largest shareholders in the company. Which is why his opinion matters at all.

Here’s what Ackman wants: some of his people on the board. He’s saying that the current board members don’t have enough experience with credit cards, real estate, or retailing.

Board members don’t really have much power, they just kind of oversee what’s happening in the company and raise their hands if they think something isn’t ok.

But wait—credit cards? Yup—that’s because those Target Cards actually function like credit cards, and that’s part of Target’s business. Same with real estate—they own the land underneath the stores.

If you or I thought Target should change its logo to something ridiculous like a green bell pepper, we’d be laughed out of the room. But if we owned most of the shares….that would be different.

What do you think about someone saying all these great things about the company… and then trying to change them? Is he getting too greedy or is he just trying to get Target’s stock price out of its 2004 levels?