Plenty of investment themes are suffering at the hands of the coronavirus and while the ProShares Pet Care ETF (CBOE: PAWZ) is lower year-to-date, it’s outperforming the S&P 500 by more than 700 basis points, indicating that the business of pets remains sturdy.
PAWZ, the first and only dedicated pet care, and retail ETF 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.
Proving PAWZ potency, the ETF has been exceptional over the past month as broader markets are rebounding. The Pet Care ETF is up more than 29% during that period, topping the S&P 500 by more than 1,000 basis points.
While some retailers are suffering because of temporary closures forced by COVID-19, pet stores are considered essential and many remain open, Then there is the online force of Chewy (NYSE: CHWY), one of the top 10 holdings in PAWZ.
Why It’s Important
“Online pet products retailer Chewy recorded a 35% year-over-year increase in revenue when it reported earnings Feb. 2, well before the COVID-19 effects were being felt in the U.S.,” according to ProShares. “Its share price has surged this year against the backdrop of a battered market, as investors look at the company and its pet care peers as potential safe havens amid the broader downturn resulting from the cessation of much of the nation’s economic activity.”
As the coronavirus environment proves, more businesses are shifting their focus to online sales in a bid to adapt to the changing environment and consumer trends. For example, car dealerships are even switching to a fully online system to help customers select cars at the touch of a button.
Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and easily meet their discretionary needs. As the retail landscape changes, investors can also capitalize on the trend through ETFs that target the e-commerce segment. That benefits Chewy and other PAWZ components with e-commerce exposure.
“Through April 6th, Chewy’s roughly 14.5% gain this year, alongside a market-beating performance from the likes of PetMed Express, Freshpet, JM Smucker and ZooPlus, have helped support the outperformance of pet care companies at large versus the broader market,” according to ProShares.
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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.