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Investing in Your Garden and Pets
12/10/2015 9:00 am EST
Americans continue to keep their wallets open when it comes to their gardens and pets, and Matt McCall, of Penn Financial Group, thinks the related stocks—such as those of these small- and micro-cap names—should keep reaching for new highs if the trend continues.
This week small-cap company Central Garden & Pet Company (CENTA) reported fiscal fourth quarter and full year earnings that showed tremendous growth. The company earned diluted earnings per share (EPS) of $0.64 for the fiscal year 2015, well above the $0.18 last year. The adjusted diluted EPS for this year were $0.74 versus $0.33 in fiscal 2014. The company also updated their guidance for fiscal year 2016 and they expect EPS to grow by at least 28% to $0.95 or higher.
The news sent the stock higher by over 10% on Tuesday after the earnings hit the wires. The company is in a niche business area that covers both lawn and garden supplies as well as products for the pet supply market. Some of the brand names the company distributes include Pennington grass seed, Amdro weed and insect control, Adams animal health brands, Horse Health equine health products.
While it may not be the best strategy to chase a stock after it rallies double-digits on solid earnings, the momentum is clearly with the stock for higher prices in the coming months.
Investors can also look at competitors of CENTA to see if there are opportunities in the garden and pet sectors.
In the lawn and garden sector, one of the market leaders is Scotts Miracle-Gro Company (SMG), a $4.29 billion company. The stock has shown great relative strength as it hit a new all time high last week and is up and impressive 12% in 2015. Spectrum Brands (SPB), a $5.65 billion company, operates in five segments with two of them matching CENTA with exposure to pet supplies as well as home and garden. The stock is flat for the year, but if it can break above resistance at $97 it could be the start of a new major uptrend.
A micro-cap company that concentrates on veterinary products for dogs and cats and its health continues to fly under the radar even though it has gained 98% this year. Heska Corporation (HSKA)—a $234 million company—has excelled as money continues to be spent on the health of Americans pets. The stock is no longer a value play, but the growth is there to keep moving the stock price higher.
When it comes to the garden and pets, Americans continue to keep their wallets open, and if the trend continues, the related stocks should keep reaching for new highs.
Matt McCall, Founder and President, Penn Financial Group
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