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Here’s why Zoetis stock is my top pick, this portfolio manager says

US drug company Zoetis (Zoetis Stock Quote, Charts, News, Analysts, Financials NYSE:ZTS) has seen its share price drop over the past year and a half, with a recovery in 2023 now looking stalled. But with lots of promise ahead for the animal-focused drug industry, the stock sure looks like a Buy right here, according to Christine Poole, CEO of GlobeInvest Capital Management, who just named Zoetis one of three Top Picks for the 12 months ahead.

“We’ve owned Zoetis for a couple of years now and we continue to like this name,” Poole said, speaking on BNN Bloomberg on Tuesday. 

“The multiple got quite high, actually, when interest rates were very low and so it was a headwind when interest rates started to rise, which impacted all growth stocks as well as Zoetis,” she said.

A spin-out of Pfizer a decade ago, Zoetis sells in over 100 countries worldwide and has a range of products for animals, with about a third of its business in livestock and the rest in domestic pets.

Business did very well during the pandemic, as pet ownership skyrocketed with the stay-at-home economy that arose due to lockdowns. But the question then was what would become of that pet interest once the world opened up again. 

Poole says the results so far are good for both the family cat, dog or rabbit and companies like Zoetis.

“I think the growth area in pet companions is still very attractive,” she said. “And they’ve found that pet owners have gotten younger — millennials tend to spend more on their pets and pet visits are up now with the clinics reopening and the spend per visit is up, as well.”

Poole pointed to Zoetis’ portfolio of new drugs and the growth potential therein, including with Librela, billed as the first monthly antibody therapy for osteoarthritis pain in dogs. 

“Librela is already available in Canada and in the UK and it’s been very well received,” Poole said.

Poole said there are advantages to being an animal health drug company, as the drug development cycle is shorter, while product shelf life is much longer because of a lack of generic competition in the space.

“They have very good returns,” Poole said. “And we like the longterm outlook for animal healthcare, and given the pullback to the stock we think it’s an attractive entry point position.”

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