The conventional wisdom is during an economic downturn vice-related products tend to do well. But in this upside-down world of market trading in 2016, a much more family-friendly niche has proven to be stronger than headwinds: the pet care group.
That's why Jim Cramer went "Off the Charts" during Tuesday's Mad Money broadcast with Bob Lang, founder and chief strategist of explosiveoptions.net, contributor to Real Money and the technical guru of TheStreet's Trifecta Stocks portfolio.
The reasoning behind the sector's durability is apparent enough, Cramer told his audience. Any dog or cat owner knows just how much Americans love their pets and are willing to spend money to pamper them. "Often they're viewed as family members, or even better than family members because they don't talk back and they never ask you for money, although dogs can certainly guilt trip and cats at expert at withholding affection," Cramer said.
To illustrate that point, Cramer, with the help of Lang, looked at the charts of PetMed Express (PETS) - Get Report , Blue Buffalo Pet Products (BUFF) , Vet Centers of America (WOOF) , Freshpet (FRPT) - Get Report , Zoetis (ZTS) - Get Report and IDEXX Laboratories (IDXX) - Get Report .
The first chart up for review was PetMed, America's largest pet pharmacy.
"Lang points out that this stock broke out to the upside on strong volume two weeks ago, then soared to new all-time highs after it reported last week. Since then, the stock has pulled back a bit and it's now trading sideways or consolidating. Lang says it needs a little rest after such a big push higher," Cramer told viewers.
He pointed out the company's trading volume was low during the time spent in its sideways pattern. Volume is an important indicator and operates as a lie detector for chart movement.
"After spending some time consolidating, Lang expects this stock to move sharply higher, which is one of the reasons why they recently bought it for TheStreet's Trifecta stocks newsletter, along with a high quant rating and strong fundamentals. Doesn't get much better than that," Cramer said.
Blue Buffalo was up next.
The high-end pet food maker has turned around its fortunes since the unfortunate timing of the company's public debut last summer. "After a big move up in March, Blue Buffalo continues to climb on high volume. Lang notes that the Moving Average Convergence Divergence, or MACD, indicator, a tool that technicians use to confirm or detect changes in a stock's trajectory, just flashed a powerful buy signal, where the black line crosses over the red one, after a month of consolidation in April.," Cramer said.
Lang sees the company's chart approaching its all-time highs of $29 per share.
"Now, last week Blue Buffalo announced a gigantic 25 million-share secondary offering, driven by some major shareholders who want to sell. Lang thinks this deal could give you a terrific entry point. He recommends waiting for the secondary to hit and then pulling the trigger," Cramer advised.
Vet Centers of America was up next.
"VCA has practically been rallying in a straight line since the lows back in February," Cramer said. "Meanwhile, the Chaikin Money Flow is looking extremely impressive, meaning people keep adding to their positions as this thing goes higher, and the Relative Strength Index, or RSI, an important momentum indicator, seems to be embedded at super bullish levels, something Lang says can persist for a long time."
Fellow high-end pet food maker Freshpet has spent the majority of its time over the past year and a half in negative territory, but it, too, has started to bounce back in recent weeks.
"Lang points out that the stock has bounced hard off its all-time lows in February, and it has continued to climb ever since. Now the Chaikin Money flow oscillator is positive for Freshpet, volume trends have been solid, and the chart has improved dramatically. This baby is still many points away from its all-time highs, but Lang thinks it might be worth buying for speculation down 50-cents or so from here," Cramer said.
IDEXX Laboratories was the next chart in the segment.
Cramer had the veterinary diagnostic company's CEO on Mad Money back in October, he noted. "Lang points out that the stock has bounced hard off its all-time lows in February, and it has continued to climb ever since," Cramer said. "Now the Chaikin Money flow oscillator is positive for IDEXX, volume trends have been solid, and the chart has improved dramatically. This baby is still many points away from its all-time highs, but Lang thinks it might be worth buying for speculation down 50 cents or so from here."
Finally, there's Zoetis.
Zoetis is the animal health company that Pfizer (PFE) - Get Report spun off three years ago. "This is an interesting daily chart," Cramer said. "Zoetis exploded higher in March and April, and Lang says its pullback in recent weeks is simply consolidation as the stock tries to digest those enormous gains. The Chaikin Money Flow has been very strong, and frankly this has been one of the best-performing pharmaceutical stocks out there of late. So it's no wonder the big boys want to buy it."
The takeaway from this week's "Off the Charts" segment is there are unsuspected sectors that are performing well, and the pet care sector is one of them. You can hang your hat on its stability, according to Cramer and Lang.