Purrfect ETF

USA

This ETMF will make money from your dog

“The more I learn of man, the more I love my dog,” Mark Twain famously quipped. And New York-based asset manager Gabelli Funds has taken note, listing a new ETMF that tracks the pet industry.

 

The Gabelli Pet Parent Fund (PETZC) will use the Eaton Vance-patented ETMF technology to invest in the “pet industry”, the prospectus says. The industry includes companies that offer services and products for pets and “pet parents”. These companies can be involved in: pet food, healthcare and veterinary services, equipment, pet-related entertainment, agriculture, toys, exercise “and consumer products that support these sectors, and any other sector which supports the well-being of pets and pet parents,” the prospectus says. (We presume “pet parents” refers to pet owners.)

 

The fund adviser then runs something of a value screen across the industry, which looks at free cash flow and earnings trends. PETZC can also take defensive positions during a market event or downturn, the prospectus indicates.

 

Analysis – Clever product

The pet industry is real and growing. Americans spend almost $70 billion a year on their pets, which, as social critics like to remind us, is much more than they give to the homeless or to the poor. Pet food alone is a real killer. Americans spend nearly $30 billion a year on pet food, driven by “innovations” like organic, weight loss and age-specific food.

Dog owners in particular are getting taken for a walk. Dried dog food is made from cheap leftovers – like loaves that falls on bread factory floors and leftover bones at abattoirs – and then sold at £4 a kilo, the same price as fresh chicken breast at supermarkets. Dog and cat food are basically the same (as a general rule: dogs can eat cat food, but cats can’t eat dog food) but pet food companies charge double for dog food, knowing dog owners will cough up for their beloved pooch. Pet food also comes without the tight regulations placed on human food, in another boon for profits.

Then there’s veterinary drugs– another woofing cash machine. Vet drugs aren’t regulated like human drugs, and aren’t covered by the NHS. This means your friendly neighbourhood big pharma can charge high margins for animal-specific drugs. Heart worm medicine for dogs, for instance, costs your local vet more than £500 for 200ml, which they then pass on to you.

 

As a dog owner I hope the pet industry gets regulated. But as an investor who doubts that’ll happen, I’d buy this ETMF.

 

China blockchain ETF from Reality Shares

Reality Shares has listed a second blockchain ETF, this time focussing on Chinese blockchain companies. The Reality Shares Nasdaq NexGen Economy China ETF (BCNA) will track an in-house index made from companies “that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology… and are incorporated in Hong Kong and mainland China,” the prospectus says.

 

To be eligible in the index, companies must be based in China or Hong Kong and meet size and liquidity requirements. Eligible companies are scored based on their exposure to and their likelihood of benefiting from blockchain, with the top 30 to 100 companies included and weighted based on their scores.