VCA Antech, Inc. (WOOF)

I have been watching WOOF for several years, and it never seemed to dip into a buy range; the price was very steady through many climates. It seems that now may be a rare opportunity, because of flat growth related to the recession. The stock is within pennies of Morningstar's 5-star range. (wish I had more cash back when it was $14, but I got some other good buys then)

WOOF is a large player in a fragmented market, which is a classic way for a grower in a boring business. (see: Sysco, Fastenal) By applying their operating efficiencies to businesses they purchase, they gain profit without investing in greenfield growth. With just over 5% of the market (by office count) there is a long way to go here. Vet offices are largely small businesses, with single or a few owners who are looking to sell when they retire. Their options are either younger vets, or WOOF. With financing difficult in the next few years and deteriorating business conditions, I expect there will be more people looking to get out than to get in.

Downsides / risks:
WOOF needs to watch out if they are at the beginning of a growth cycle. They overpaid a decade ago, but have done very well since emerging again as a public company in 2001.

The big pet retailers could also pose a threat, with in-store clinical care. Of course, this could be an M&A opportunity as much as a threat. I think people also are drawn to a smaller setting for their pet's doctor than for supplies or grooming. Even if they went this way, however, the market could sustain a few large players and keep consolidating.

I nice little growth company in the animal heath sector. They grow almost entirely by snatching up small animal hospitals. Also have a very high margin diagnostic business that is very complimentary to the hospital business.