Peter Lynch is famous for urging investors to look for great companies by reviewing the products they or their family members use every day. Lynch's strategy is easy when you can't stop thinking about how great your newest tech gadget is, or your spouse won't stop talking about how great a new clothing designer makes her look. But what about those family members who can't vocalize their excitement? If you're one of the 62% of Americans who have a household pet, you may be missing a great investment opportunity begging for your attention.
A $50 billion industry
Total U.S. pet-industry spending was estimated to top $50 billion in 2011 and has been growing almost 6% every year since 2001. Owning a company like Procter & Gamble
The pet industry has a lot of mutts running around. It's extremely fragmented, with dozens of small shops and groomers available in just about any town. Only two national pet stores effectively dominate in the industry: PetSmart
Outsmarting the handler
PetSmart recently announced fourth-quarter earnings and beat analyst estimates across the board. The retailer earned $102 million, or $0.91 per share, above the $0.90 the Street was expecting. Revenue was $1.64 billion, beating the $1.62 billion prediction. PetSmart is now forecasting earnings for 2012 at a range of $3.02 to $3.16 per share, leaving outsiders' estimates of $2.54 per share in the dust.
Small dog in a big park
Over the next five years, PetSmart is expected to grow its bottom line by 16% annually, compared with 13% at Costco
Foolish bottom line
Although all of the companies I've mentioned here will give you some exposure to the growing pet industry, if you're looking for that true niche player, I strongly believe PetSmart is the way to go -- not only because of the great growth opportunities it has ahead, but also because it's the top dog in the sector. I recently gave it a thumb-up CAPScall.
If PetSmart's not for you, but still want exposure to the retail industry, check out this free report about one retailer that reminds our analyst of a young Costco. The company has been named The Motley Fool's Top Stock for 2012, so don't miss out on your opportunity to uncover it today.
Fool contributor Matt Thalman owns none of the companies mentioned above, but his German shepherd is a regular shopper at the local PetSmart. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services have recommended buying shares of Procter & Gamble, Costco Wholesale, and PetSmart. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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