People Love Their Pets

September 12, 2024

From the Desk of Steve Strazza @Sstrazza

People love their pets... but investors seem to hate them.

Could it be muscle memory, back to the glory days, when pets.com was one of the best shorts of the dot com?

Are these companies just built poorly?

Whatever it is, short sellers love betting against these names.

And lately, it seems like it is the whole group. While the short positioning suggests these companies are all bad, the trends tell us the opposite.

Let's talk about the positioning in some of these pet stocks and how we can take advantage of it.

First up is the $1.3B pet health & wellness services provider, Petco $WOOF:

We first covered Petco in June, after the retailer had its best 3-day rally in history.

With a 200% run-up in the month of May, the stock earned a few months of digestion, and that is exactly what's played out.

Last week, it rallied over 50% on the heels of earnings, sparking a new short squeeze.

With a 29% short interest and 4x days-to-cover ratio, WOOF is primed for a fresh leg higher. We think it's already started.

We're long WOOF above 4, with a target of 7.60 over the coming 1-3 months.

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