Indirect Hedge Fund Help For ProShare Pet Care ETF

The ProShares Pet Care ETF (CBOE: PAWZ), the first and still the only dedicated pet care exchange traded fund, may be getting some indirect assistance from a well-known hedge fund.

Lone Pine Capital has acquired a large stake in newly public Chewy, Inc. (NYSE: CHWY). That stock entered PAWZ last week and is now the ETF’s fourth-largest holding. Earlier this month, Chewy Inc (CHWY), a subsidiary of PetSmart, priced the initial public offering of 46,500,000 shares of its Class A common stock at $22 per share.

“Lone Pine apparently bought a large amount of class A Chewy stock on the first day of trading, enough to acquire a 5% stake, which necessitates a regulatory filing to the Securities and Exchange Commission,” reports Ed Lin for Barron’s. “As of Monday, Lone Pine owned 3.29 million class A Chewy shares, a 6.1% stake, according to the form it filed with the SEC.”

PAWZ includes sectors such as veterinary pharmaceuticals, diagnostics, services, and product distributors; pet and pet supply stores, and pet food and supply manufacturing. Heavy on companies with exposure to the pet healthcare industry, PAWZ is beating the largest traditional healthcare ETF by a margin of more than 2-to-1 this year.

Lone Pine Goes Big

“Lone Pine, which managed $17.1 billion in U.S.-traded assets as of March 31, is now Chewy’s second-largest holder, according to S&P Capital IQ,” notes Barron’s. “The top shareholder is Argos Holdings, a closely held company that owns PetSmart, Chewy’s parent company.”

PAWZ is the ETF with the largest stake in Chewy and the fund makes for a logical destination for the stock.

“PAWZ is the only ETF focused on the pet care industry,” said Maryland-based ProShares in a statement out Friday. “It gives investors the opportunity to gain broad exposure to public companies in the global pet care industry—companies like Chewy that stand to potentially benefit from the proliferation of pet ownership and the emerging trends affecting how we care for our pets.”

“The hype surrounding Chewy’s IPO—it priced at the high end of the range indicated to potential investors—may have marked it as a name that value-oriented fund managers would shun,” reports Barron’s. “But Barron’s has noted that in the past, Lone Pine has been willing to buy growth-oriented technology stocks with high near-term price/earnings ratios.”

For more investment opportunities, visit our Core ETF Channel.