Elanco (NYSE:ELAN)

Elanco was spun out of the giant pharmaceuticals giant Eli Lilly (LLY) last September. And it’s only operated as a stand-alone business for six months.

But the healthcare firm already operates in 90 countries around the world as a leading provider of products and services that improve animal health.

We are talking about animal nutritional supplements, vaccines, treatments and pet products of all kinds.

This is a trending business to be in right now because pet ownership rates are increasing… pet lifespans are on the rise… and owners are willing to spend more than ever on their furry family members.

And front traders know just how well-positioned this company is to benefit as a standalone company unshackled by the much-larger Eli Lilly. (More on this a little later.)

Without having posted a full year of financial results, Elanco hasn’t yet made it into the stock-screening tools that most big-money institutions use.

Within Eli Lilly, Elanco competed for capital with many other divisions, which it needed to exploit a huge growth opportunity.

Now fully in charge of its own destiny, Elanco’s management can put the pedal to the metal and really focus on growing its business.

This story has actually just played itself out in another pet healthcare company.

In 2013 Pfizer (PFE) spun out its animal health business called Zoetis (ZTE) as an independent company.

Since that 2013 spin-out, shares of Zoetis have more than tripled since becoming an independent company.

In addition to the opportunity to grow revenue rapidly, front traders are also seeing a huge opportunity for Elanco to become more efficient and improve profit margins.

Elanco’s profit margins are around 20% now. That’s barely half of the 39% margin that Zoetis generates.

The lower margins were the result of inefficiencies created by operating within a giant company like Eli Lilly.

Now as a focused, nimble standalone business, Elanco’s management can quickly cut costs and drive earnings higher.

When Zoetis was spun-out of Pfizer in 2013, it started out with the exact same margin: 19%.

And within five years, it more than doubled that figure. That sent earnings per share – and as a result, the stock – soaring.

In Elanco, traders are looking for the next Zoetis. And they’re moving in on this play swiftly.

Top traders had also picked up on this opportunity:

- Market-thumping Primecap Management has acquired more than 5 million shares worth in excess of $150 million
- Legendary value investing firm Franklin Resources has picked up almost $100 million worth of Elanco shares
- And Heavyweight asset manager Blackrock now owns more than 2.7 million shares of Elanco worth in excess of $85 million

These early-birds hope to catch this worm well ahead of the Street. And if they’re right… they could easily double, or even triple their investments.

The ride could be rocky, of course, as young companies can be volatile investments.

Because Elanco is a such a young, unproven company… I’m not going to recommend it officially here at Weekly Squawk Box.

But if you position yourself alongside the smart money here, the long-term rewards could be well worth your time and money.