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3 Ways Your Pet Can Make You a Better Investor

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Have a dog or cat? Maybe a fish or a horse? Believe it or not, they can potentially make you a better investor. Here's how:

1. You're not the only pet lover out there.
The days of Snoopy sleeping in the dog house are over. Dogs are moving inside. Mine sleeps in the bed with us.

Cats are the same way. Both of our cats aren't allowed to go outside to reduce the likelihood of disease and other real-world issues like being hit by cars.

As members of the family, owners don't want anything to happen to their pet, and if something does, pet owners want it fixed. That all costs money, but people are more willing than ever to shell out the cash for their pets. 

According to Vetnosis, a research and consulting firm specializing in global animal health and veterinary medicine, sales of products for domestic animals are expected to grow 5% from 2011 to 2016. That's not hyper growth, but it's a nice solid increase for companies that produce products for Fido and Snowball.

Fourth-quarter revenue at PetSmart  (UNKNOWN: PETM.DL  )  was up 15% thanks to the addition of new stores and increasing same-store sales; earnings jumped an impressive 36% year over year. Over the last five years, shares are up more than 200%, proving that pets need food and get sick even in bad times, making the industry somewhat recession-proof.

2. Invest in what you know.
Peter Lynch was right. It's a lot easier to invest in things you know. If you've got a pet, you have inside knowledge about what pet owners think of certain products.

Like a product? Flip over the package and see who makes it. The flea protection Frontline, for instance, is made by Merial, Sanofi's (NYSE: SNY  ) animal health division. Frontline's competitor, Advantage, is sold by Bayer.

Other products you might have to ask your vet about. Zoetis  (NYSE: ZTS  ) , for instance, sells an antibiotic for skin infections called Convenia, which is injected by the vet. Zoetis was spun out of Pfizer earlier this year and is a pure-play animal health company. In addition to selling products for companion animals, the company sells products to keep livestock healthy.

Quite a few other pharmaceutical companies including Merck (NYSE: MRK  ) , Sanofi, Eli Lilly (NYSE: LLY  ) , Bayer, and Boehringer Ingelheim have animal health divisions. The latter two aren't available on U.S. exchanges.

With pharmaceutical companies, you're getting a lot of drugs for humans, which will drive revenue. Sanofi recently lost Plavix to generic competition, which hurt revenue; Merck just lost exclusivity on its megablockbuster Singulair; and Eli Lilly will see multiple top-selling drugs face generic competition in the coming years. Given the other products, you can't buy them solely for their animal health products, but the animal-health products can deaden the blow from the loss of human blockbusters.

Obviously, it's not smart to jump from, "I like this product" or "I shop here" to buying shares of the company, but your personal knowledge offers a nice jumping-off point to take a further dive into the financials of a company.

3. Stay calm.
Investing is stressful. Over the long term, the stock market generally increases, but it's often a bumpy ride with large increases and decreases. Investors that panic, selling at the low point will generally do worse than those that can stay calm.

Even if you're not investing in companies that sell animal health products, your pet can make you a better investor by relieving stress. Watching fish swim around their bowl or petting your cat or dog has been shown to lower the level of a stress hormone called cortisol and increase serotonin, which improves your mood.

Also, according to a study by finance professors Josef Lakonishok, Andrei Shleifer and Robert Vishny, fund managers would have performed better by sitting tight and not trading. From 1983 to 1990, the managers tracked had an average annual return of 15.3%, but if they had just made an adjustment at the begining of the year and held their stocks for an entire year, the return could have been 16.1%.

With any luck, after making good investment decision in the animal-health space and elsewhere, you'll be sharing your steak and lobster with your pet.

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