Walk Your Portfolio to the Vet

 | Aug 17, 2012 | 1:00 PM EDT
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In a recent story, I discussed the preformance of nutritional-supplement makers, which I was motivated to scan when I saw Thursday's news about Blyth's (BTH) planned spinoff of supplement maker ViSalus

Another initial public offering in the works is Pfizer's (PFE) spinoff of its animal healthcare unit. The company, named Zoetis, filed for an IPO earlier this week. This will likely be a large offering, as Zoetis is already bringing in $4.2 billion a year in revenue. The company has 9,000 employees -- not exactly a scrappy garage startup. 

Another development from pet-land that caught my eye was Thursday's heavy-volume 4.6% gain in PetSmart (PETM) following the company's second-quarter report. The retailer raised its annual profit view for the second time in a year.

PetSmart shares rallied to a session peak of $72.50 Thursday, also an all-time high. The company has notched earnings growth in each of the past three years, and Wall Street expects people to continue shelling out the big bucks for Fido and Fluffy. Analysts have pegged a fiscal 2013 increase at 30% to $3.32 per share. In fiscal 2014, that number is seen rising another 11% to $3.69 per share. 

Elsewhere in the animal-related category, a few medical names are showing good price and earnings strength.

Patterson Cos. (PDCO) shares have been trending along their five-day exponential moving average, en route to the stock's best levels since May 2011. The company's three main business lines are medical, dental and veterinary.

The animal healthcare segment consists of Webster Veterinary, which distributes vaccines and a range of other products to vet clinics via 11 locations around the U.S. The company also offers veterinary practice management software.

Patterson is due to report its fiscal first quarter before the open on Aug. 23. Analysts expect earnings per share of $0.49 a share on revenue of $883.53 million. Those would constitute year-over-year increases on both the top and bottom lines.

Another medical company that supplies products to veterinary practices is Abaxis (ABAX). The firm makes diagnostic gear used in the treatment of various conditions.

The stock has been getting good support along its 10-week moving average. On a more granular level, it's been trending above its five-day exponential moving average all week. It's currently in a potential buy area, but be careful about making a purchase if the stock is too far extended from that short-term line. 

The fundamental story here looks solid, with analysts expecting the company to begin growing earnings again after a dip in 2012. In fiscal 2013, income is expected to grow 29% to $0.75 per share. That's seen rising another 47% in 2014, to $1.10 a share.

Fundamentals have turned around in the past few quarters. Year-over-year revenue growth has accelerated in the past couple of quarters. Earnings growth resumed again two quarters ago following three straight quarters of declines.

Traders should be aware that this is a volatile stock, with a beta of 1.21. It's also thinly traded. The company has market capitalization of around $850 million, and it moves about 119,000 shares a day.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider ­­­­ABAX to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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