The ProShares Pet Care ETF (CBOE: PAWZ) is one of a small number of ETFs with strong exposure to online pet retailer Chewy (NYSE: CHWY). Although Chewy shares retreated last week following the company’s fourth-quarter earnings report, it may be a case of investors overreacting and glossing over Chewy’s leverage to the coronavirus and online retail themes.
PAWZ includes sectors such as veterinary pharmaceuticals, diagnostics, services, and product distributors; pet and pet supply stores, and pet food and supply manufacturing. Healthcare and retail stocks make up a significant portion of the PAWZ roster and the ProShares ETF has the potential to outperform traditional funds tracking those sectors.
“We are seeing 13.5 million of our active customers engage with us and making sure that we are delivering their essentials and supplies,” Chewy CEO Summit Singh said in an interview Friday on Yahoo Finance. “We are seeing a meaningful lift in new customers migrating to our platform as social distancing is practiced more and more.”
PAWZ seeks investment results, before fees and expenses, that track the performance of the FactSet Pet Care Index. The fund seeks to invest substantially all of its assets in the securities included in the index. Under normal circumstances, the fund will invest at least 80% of its total assets in the component securities of the index. The index consists of U.S. and non-U.S. companies that potentially stand to benefit from interest in, and resources spent on, pet ownership.
“According to a couple of key data findings, Chewy’s momentum will likely continue into the first quarter. Bank of America gathered aggregated credit and debit card spend at pet retailers through March 24. The monthly data for January showed year-over-year growth of 6.5% and 9.8% growth in February,” reports Yahoo Finance.
It’s just one example, but Chewy underscores the leverage PAWZ has to the online retail theme, an increasingly important trait in the coronavirus environment.
Soaring e-commerce sales could move more quickly to the upside because the COVID-19 pandemic is forcing a slew of malls and retail store closures across the world. In the U.S., many non-essential retailers are temporarily closed and while traditional grocery stores remain open, many shoppers are opting to order from home and not risk contracting the coronavirus by venturing outside.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.