Zoetis Inc. (ZTS)

Zoetis makes medicines and vaccines for animals — from household pets to commercial herds.

The veterinary market is gentler than the human one: no insurers dictate price, patent expiries pass without a collapse, and products stay on the market for decades. The owner pays out of pocket and does so willingly — spending on pet health grew faster than consumer spending generally for decades.

The most valuable products treat chronic conditions such as dermatitis and osteoarthritis, which put the animal on a lifelong course and give the company recurring revenue. The other half, livestock medicine, depends on meat and milk prices and is markedly more cyclical. Risks: generic competition and the discretionary nature of pet spending in a downturn. Zoetis pays a dividend.