One of the most fascinating things, to me, to come out of this pandemic, was how quickly the country rushed to adopt pets. Several friends of mine, upon facing quarantine, immediately went out to their local shelters to try and adopt puppies and kittens. I slowly began to realize that this wasn't just an aspect of my friend group, but part of a larger trend among the American populace. Animal shelters and the SPCA have reported skyrocketing adoption rates, and the trends for adopting and caring for pets, long term, have never been better.
This discovery brought me to one of the best investments I've made recently, which was in TRUP, or "Trupanion". I'd now like to to share the idea with all of you.
Trupanion is an insurance company that sells insurance for pets and animals. While some might look at the word "insurance" and go "ugh, why would I care about such a stagnant / boring industry", I would encourage you to take a look at TRUP's income statement. The year over year sales growth numbers are incredible, and steady. The increase in owners getting pet insurance has been rising quickly, and I would argue that caring for pets is also a secular millennial growth trend, not unlike shopping at whole foods or buying lululemon workout clothes. Caring for our pets seems to be part of our (the millennial generation's) ethos. The company is also structurally profitable, which is something that other quickly growing companies cannot say.
And, if the relative obscurity and quick revenue growth of this stock don't have you excited yet, take a guess at the percentage of pets in the United States that have insurance. Ready? It's 1%. That means that this company's total addressable market, even assuming they are able to eventually take a 20% market share, is more than 40x current revenues. That kind of structural profitability, speed of growth, and huge market opportunity don't come around very often, and present a massive potential windfall for keen investors.
Alright, so the company has been around for a while, and you could have said this at any point over the last 2 years. In that time, the stock has mostly traded sideways. Why now? Why won't it continue to go sideways? In short, because of the pandemic. A spike in pet adoption and ownership will invariably lead to higher demand for pet insurance, and higher usage will lead to higher mainstream consciousness of the product, which is a positive flywheel. This was a huge catalyst for the stock which 'awakened the giant' so to speak, and it wouldn't surprise me to see further and accelerating investment in this name. Additionally, now that the FED motioned that it will keep interest rates low for years into the future, growth companies will be back in favor even more strongly. So many positives to owning this company right now.
From a technical perspective, this company finally broke out of a consolidation, and there is massive potential and room to run. The pandemic sparked a move in the stock that broke it out of a multi year range, and now that it's moving you would be amiss if you didn't consider climbing aboard the train. I'm looking at further upside towards ~120, which, from a fundamental perspective, looks to be the top end of estimates when it comes to valuing pets NPV to the company.
I like it, and at the very least you owe yourself a look at this opportunity.
Hey, I share your entusiasm around this company. I believe big inssurance actors will position themeselves as well, which is already the case, at least in Europe. Even though I agree even a 10% or 20% market share is huge compared to the huge market to developp. that is ture in the US, but internationally as well.
I only wonder if the share price will be proportional to the increase in market penetration.
I only wonder if the share price will be proportional to the increase in market penetration.