Tickers in this Article: MWIV, PETS, PETM, WOOF, NEOG
Not even one of the worst recessions in decades could slow down the billions spent by Americans on their beloved pets. According to the American Pets Products Association, owners spent $45.5 billion on their pets in 2009, up from $43.2 billion in 2008. The projections in 2010 call for an increase to $47.7 billion. IN PICTURES: 20 Tools For Building Up Your Portfolio

Pet Supplies
The largest, publicly traded pet supply retail is PetSmart (Nasdaq:PETM) with over 1,100 stores and an additional 740 animal hospitals. The company made headlines recently when it announced a 25% hike in its dividend payout and increased its share repurchase program to $400 million. Both are positive developments in what is still a difficult environment. Technically, the stock has been strong, nearly hitting an all-time high in May. Fundamentally, PETM is also attractive with a forward P/E ratio of 14.3 and a current price-to-sales ratio of only 0.68.

Animal Health
Spending on doggie toys not slowing, so it comes as no surprise that the money going to maintain pets' health is following the trend. Therefore, investors who are interested in investing in the growth in spending on pets can also choose to look at companies that run the animal hospitals or supply the medicine administered by the veterinarians. (For related reading, see The Economics Of Pet Ownership.)

MWI Veterinary Supply (Nasdaq:MWIV) is a distributor of animal health products to veterinarians and animal hospitals. The company was able to flourish during the recession, and revenues increased by 25% in 2009 over 2008 numbers. Analysts expect revenue growth to slow a bit, but continue with a solid pace in 2010; estimates are for 20% growth.

While MWIV supplies its products to doctors, PetMed Express (Nasdaq:PETS) markets its prescription and non-prescription pet medications directly to the consumer via 1-800-PET-MEDS. The company was downgraded in May by Wedbush citing competition from none other than Wal-Mart (NYSE:WMT). This is not a big surprise considering Wal-Mart has the foot traffic to sell pet medications at a discount. The stock has been in a dramatic sell-off since April and should be avoided at this time.

Hospitals and Testing
VCA Antech
(Nasdaq:WOOF) operates in three divisions: animal hospitals, laboratories and medical technology. The company is trading at an attractive 14 forward P/E ratio, however growth could be questioned if a double-dip recession occurs. After all, an elective surgery for Fido could be put on hold until the family's finances improve, whereas dog food and toys will be a constant expenditure.

Neogen (Nasdaq:NEOG) is an interesting play because it is involved in food and animal safety products. The animal safety division focuses on drugs, vaccines, medical equipment and diagnostic tests that can be sold directly or through large farm supply retail chains. The most impressive fact about NEOG is its consistent revenue and earnings growth through bull and bear markets.

The Bottom Line
Depending on what the overall market decides to do in the second half of 2010, most stocks could be pulled down by more selling. The animal-related stocks should hold up better than the overall market in the event of a new bear market and with solid growth may be positioned to join the party if stocks rally.

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