While the nation bitterly debates Iraq troop levels, medical care for the indigent and the need for college football playoffs, there is one thing everyone agrees on: We love our dogs and cats beyond all reason and will pamper them in sickness and in health.

No longer do most dogs get old hambones or bags of kibble in their bowls in the backyard. Today they have come under the scrutiny of big-time marketers who see them as monetizable targets akin to cute little kids. On television and Web sites and in splashy direct-mail campaigns, households are encouraged to lavish pets with organic meat, resort vacations, designer clothes and cosmetics, psychotherapy and specially formulated water. It's goodbye Fido, hello Fidollarbill.

The apotheosis of pets for financial purposes has been going on for some time, of course, but only recently has it launched into the stratosphere as an accelerating multibillion-dollar business. Americans spent $36 billion on food, shelter, health care and luxuries for their pets last year, which is about twice the GDP of Costa Rica.

The pet industry is one of the fastest-growing subsectors in the entire U.S. economy, growing by as much as 6% a year.

'The Isolation of Humans'

Got dog? Something like 63% of U.S. households report owning a pet, which means around 74 million scamps camped on our couches, begging at our tables and barking at anyone with the temerity to walk past our front doors. To put that in perspective, the U.K. has only 60 million people, no match for our army of Labs, shepherds and calicos.

Cultural anthropologist Jim Williams of the Williams Inference Center in Connecticut observes that the humanization of pets is one more sign of the isolation of humans. In a recent note to investment clients encouraging them to focus on companies capitalizing on this trend, he mused that the money spent on animals may infer a certain lack of loyalty in humans.

Our animals always love us, even when it seems that everyone else we know is talking on cell phones, plugged into iPods or journaling on blogs. Add to this the empty-nesters who seek pet companionship and the younger couples who delay having children, and you've got an absolute pet epidemic on your hands.

In a moment, I will bring to your attention two great and undervalued companies that should help you make some money off your own moocher. But first you really need to get the bigger picture.

Puppy Pacemakers

Health care for animals today is just a step away from the advances offered to humans. Rather than just putting their ailing mutts to sleep as in the old days, people are treating dogs and cats for cancer, replacing their joints and fitting them with pacemakers. A quarter of owners in dog-crazed England have pet insurance costing nearly half a billion a year.

I've got two black Lab mixes at home, and not only do they get priority seating on sofas and walks in the freezing rain, but they also get (unlike us) truly relaxing vacations at the "paradise" pet lodge when the family goes skiing or camping. I just hope they never get sick, because the number of veterinarians has not kept pace with the growth in the number of pets, and vets' fees are skyrocketing. The 28 U.S. vet schools are maxed out with 2,600 new students per year, according to reports, and overseas vet schools are challenging offshore med schools for the smartest candidates out of colleges.

Williams notes that society and government have permitted dogs to integrate more fully than ever into Americans' lives by allowing them into restaurants, airplanes, offices and health spas. That's for the psychological support of anxious owners -- not just as a service for the blind. And since new federal regulations don't include language about training, Williams observes, empowered pet owners are gaining admittance to malls, public transport and housing with any old untrained puppy.

Animal culture has conquered Hollywood, too, as penguins, fish and bears have captured huge box office in the past 12 months alone.

To give your own Spot the star treatment, you can take him to the Buttercups Paw-tisserie bakery for organic biscuits in New York, give him a "bark day" party for his birthday, provide "doga" sessions while you do yoga, apply Pawlish to his cuticles, freshen his breath with Four Paws toothpaste or find him friends online by creating a cute page at Dogster.com.

In London, the hot new resort is Mypetstop, a spa, exercise, hydrotherapy and chill-out center chain owned by Mars Inc., a company better known for M&Ms and Snickers bars.

The Pet Portfolio

So what happens if your four-legged best friend just needs an aspirin, not aromatherapy? That's the arena of the $3 billion pet drug business in the U.S., led by PetMed Express ( PETS), a specialty online and direct-mail pharmacy.

Customers call 1-800-PETMEDS to get prescription and nonprescription medication and other health products, including such well-known brands as Frontline, Advantage and Heartgard. The company, whose balance sheet is rock-solid, earned around $14 million on $150 million in sales over the past 12 months, and while the past quarter might not have been red-hot, I expect earnings to accelerate in the current quarter. When this is combined with a share repurchase program, a superb return on invested capital of 35% and improved expense control, I expect PetMed to grow around 19% in 2007 and up to 28% in 2008.

Now trading around $13.50 with a forward price-to-earnings multiple of 17, if a few things go right you could easily see PetMed trade up to the $18 to $20 area over the next 12 to 18 months as the multiple lifts toward 20. That would be a 45%-plus gain from here. It's a buy right now.

Meanwhile, you just have to love a stock that goes by the symbol WOOF. That's VCA Antech ( WOOF), which runs a chain of veterinary hospitals and diagnostic testing labs focused on pets. Its VCA Animal Hospitals perform everything from internal medicine to ophthalmology, dermatology and cardiology, and it has special X-ray and ultrasound equipment just for small animals.

Shares are up sixfold in the past five years but have just recently traded off after management gave its typically conservative forward earnings guidance. The company earned $103 million on $957 million in sales over the past 12 months and is on track for 15% to 20% annual growth through the rest of the decade.Trading at a 24 times forward multiple, shares are not undervalued; they simply represent a classic growth-at-a-reasonable-price story.

Use the recent weakness to buy WOOF here around $32.50 as a play on the great secular demographic trend toward pet care, and target the low $40s over the next 12 to 18 months, which would be a gain of 30%.

In sum, I just have to say this: It's a dog-eat-dog world out there on Wall Street. Might as well make the most of it.

At the time of publication, Jon Markman did not own shares of any company mentioned in this article.

Jon D. Markman is editor of the independent investment newsletter The Daily Advantage. While Markman cannot provide personalized investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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