IT'S INTEXAS

For about three years now, an army has been marching north. Not an army of people — an army of flies. I've been following it the way you follow a distant storm: at first with mild curiosity, lately with a knot in my stomach. It's called the New World screwworm, and the word "fly" doesn't begin to do it justice.

This is an insect whose young eat living flesh. A female lays her eggs in the smallest opening — a scratch, a tick bite, the navel of a newborn calf — and when the maggots hatch, they screw themselves down into healthy tissue with hooked mouths. The wound doesn't scab over. It widens. Left alone, the animal dies within days. And the fly isn't fussy: cattle, deer, horses, dogs, even people.

For the last few years it has been tearing through Latin America. A barrier that had penned the fly inside South America for decades gave way around 2023 — and in twelve months one country, Panama, went from around 25 cases a year to more than 6,500. From there it marched north: Costa Rica, Nicaragua, Honduras, Guatemala, Belize, El Salvador. Costa Rica declared a national emergency. There have been human infections, and deaths.

Here's the part that gives me both hope and context: we have beaten this thing before. In the 1950s and 60s, the United States wiped the screwworm out entirely. And not with poison.

The trick was sex. Scientists had worked out that the female screwworm mates only once in her entire life. So they bred the flies by the million, sterilized the males with radiation, and rained them down from airplanes over infested land. Wild females mated with sterile males, laid eggs that never hatched, and the population collapsed. By 1966, the fly was gone from American soil.

To keep it gone, the U.S. and Panama built what amounts to a permanent fly wall at the narrow waist of Panama — a factory breeding up to 100 million sterile flies a week, released to kill off any stragglers creeping back up. For decades, the wall held — until it didn't.

When the barrier finally gave way, the march came north in earnest: country by country, up the spine of Central America and into Mexico. This spring it reached a young calf in the northern Mexican state of Nuevo León — roughly sixty miles from the Texas border. Sixty miles. That's a morning's drive. For the first time, the storm was close enough to feel.

Let me be straight with you, because this issue changed while I was writing it. For months, the story was how close the fly was getting. Then, on June 3rd, the USDA confirmed the first case on U.S. soil in sixty years — a single calf in Zavala County, Texas. The response was immediate: a quarantine around the ranch, stepped-up trapping, and millions of sterile flies — the same trick that beat it last time — released to stop it breeding. Officials stress the food supply is safe, and so far it's just the one case. So this isn't a forecast of doom; it's one confirmed case, with the containment machine now being tested in real time. But the question this whole issue was built around — what happens if it doesn't hold? — just stopped being hypothetical.

Because it would be landing at the worst possible moment. America's cattle herd is already the thinnest it has been in three generations — drained by years of drought, costly feed, and ranchers selling off the cows they'd normally keep to breed. Watch how far it has fallen.

Fewer cattle is one problem. A flesh-eating parasite loose among the few that remain is another — and both push in the same direction. The first place you'd feel it isn't a ranch in Texas. It's the price of dinner.

Here's what makes the screwworm real rather than hypothetical: it's already tightening supply, before a single case has crossed the border. To stop the fly hitching a ride north, the U.S. has repeatedly halted live-cattle imports from Mexico.

In a normal year, more than a million feeder cattle flow north across that border into American feedlots. Shut the gate, and you pull them straight out of an already-starved system.

Pricier beef is bad for shoppers, bad for restaurants, bad for the big meatpackers already losing money on every steer. That part I expected. But then a quieter question crept in, and I couldn't shake it.

The screwworm doesn't only attack cattle. It attacks any warm-blooded animal with a wound. Wildlife. Horses. And — this is the part that made me sit up — dogs and cats. In outbreaks across Latin America, household pets have been among the infected, and an untreated infestation in a small animal can be deadly.

There are over a hundred million dogs and cats in American homes. I'm not telling you the fly will reach them; containment may hold it back for years, or for good. But I invest by asking "what if," not "what's certain." And "what if it reaches the family pet" is a question almost nobody is pricing.

That question is what sent me looking — not for who suffers if it gets ugly, but for who protects. Who makes the treatments and the prevention a worried rancher or pet owner reaches for first. Both roads, it turned out, run through the same set of shelves.

So I pulled the thread. Cattle, then beef prices, then that darker question about the family pet. And at the end of it, one company kept coming up. Not a fly-killing startup. A boring, profitable, world-leading business — sitting near its lowest price in five years, for reasons that have almost nothing to do with the fly. I bought it.

Zoetis — you say it "zo-EH-tiss" — is the largest animal-health company in the world. If a medicine, vaccine, or diagnostic test is keeping an animal healthy somewhere, there's a good chance Zoetis made it. They sell across roughly a hundred countries, to two very different kinds of customer.

On one side: livestock — cattle, swine, poultry, fish — the products that keep the food supply healthy. On the other, and larger: companion animals, the dogs and cats people treat like family. Pets are about two-thirds of the business.

Their flagship pet product, Simparica Trio, is a once-a-month chewable that protects dogs against fleas, ticks, and worms in a single dose — the number-one canine parasite preventative in America. Parasiticides, the whole category of "stop the bugs that latch onto animals," is Zoetis's biggest product line. A screwworm is a parasite. Sit with that, and you can see where this is going.

If the worst case ever arrived, the response would run straight through Zoetis's shelves. But I want to be very clear, because this is where most newsletters would lie to you: that is not why I bought the stock. The fly is the spark that got my attention. The reason I bought is the business underneath — so let me show you that in plain English.

If you're newer to this, don't let the financial words scare you. There are only a handful of ideas you need to judge whether a business is a good one — and Zoetis is a near-perfect teaching example of every one. Four numbers tell most of the story.

Gross margin is what's left after the direct cost of making the product. Last year Zoetis sold about $9.5 billion of medicines, vaccines, and tests — and kept roughly 72 cents of every one of those dollars after the cost of making them. A corner-store soda might keep 20 or 30. When a company holds 70-plus, it usually means customers can't easily switch to something cheaper. That gap is the moat.

Net margin is what survives after everything else — the salespeople, the labs, the factories, the interest on debt, the taxman. Out of that $9.5 billion, Zoetis kept $2.67 billion as pure profit. About 28 cents on the dollar. Plenty of good companies never crack 10.

Free cash flow is the money that actually lands in the bank after the bills are paid and the equipment is maintained — the truest measure of what a business really earns. In the first quarter of 2026, Zoetis brought in $401 million of operating cash and spent $110 million running and growing the business, leaving about $291 million of free cash — roughly 13% of sales. That was a soft quarter, dragged down by timing and a build-up of inventory; the same quarter a year earlier threw off $515 million. But zoom out and the engine is enormous: across all of 2025, Zoetis produced about $2.3 billion of free cash flow — roughly 24 cents of every sales dollar, up from 19 cents just two years before. That number, and the way it keeps climbing, is the one I keep coming back to.

Return on equity — ROE — asks a simple question: for every dollar of the owners' money tied up in the business, how much profit does it spin off in a year? Zoetis runs north of 60%. That is enormous; a solid business is often happy with 15 or 20. One honest catch, and it ties back to a risk I flagged earlier: that figure is flattered by all the stock Zoetis has been buying back, which shrinks the equity the profit is measured against and makes the percentage look even bigger. Strip that out and it's still an elite, capital-light business — just not quite as superhuman as 60-plus makes it sound.

The balance sheet is healthy where it counts: about $3.15 of easy-to-reach assets for every $1 of near-term bills. And on top of all that, Zoetis pays a dividend — just raised — that works out to roughly a 2.8% yield at today's beaten-down price: a small cheque that shows up whether the stock rises or falls.

In early May, Zoetis reported a rare miss and trimmed its outlook for the year. The stock, already sliding, fell hard. The market's verdict was blunt: sell the whole thing.

But read the report and the weakness is narrow, not broad. The pain is in the US pet business — skin-allergy and pain-relief products — where owners turned price-sensitive, vet visits softened, and cheaper generics arrived. Those are real problems, and I won't pretend otherwise. Yet parasite prevention held flat, livestock grew double digits, diagnostics grew, and the whole international business grew.

Here's the irony I can't stop thinking about. The thing that broke the stock is weak pet demand. The one event that would reignite pet demand overnight, across the entire country, is a parasite scare that sends every dog and cat owner reaching for prevention. The market sold the weakness. It isn't paying a cent for the thing that could flip it.

I like businesses where demand barely depends on the mood of the economy. People feed their families and care for their pets in good times and bad. Animal health sits on that bedrock, and Zoetis sits on top of animal health. The long-term tide — a growing world that needs more protein, more pets, longer-lived pets — pushes one way for decades.

Against that tide, the market handed me a world-leading compounder near its cheapest price in five years, because one region of its pet business hit a rough patch. That alone would have interested me. What turned interest into conviction is the free option on top — and as of June 3rd, that option started to pay: a parasite that just crossed into the country, reigniting exactly the demand the market had written off. I still pay nothing extra to own it.

So I'll say it plainly. I'm not buying it because of the fly story. I'm buying a wonderful business that went on sale, with a tail the market isn't pricing. If the screwworm is contained and forgotten by autumn, I still own a high-margin, cash-generating leader I bought cheap. If it isn't, I own the company the whole country turns to. Both roads are fine. That's the kind of setup I wait years for.

Also, while I was researching this, I kept tripping over the same kind of story. An invasive parasite called the Asian longhorned tick has spread to more than twenty U.S. states, draining cattle by the thousands and carrying a blood disease that jumped from a handful of Missouri counties to more than half of them in two years. And here's the chilling part — the screwworm was beaten by sterilizing the males, so the females laid eggs that never hatched. That trick is useless against the longhorned tick: the females don't need males at all. A single one can clone an entire army by herself. The screwworm is just the loudest example of a quieter, broader truth — a warmer, more connected world is a buggier one, and animals, livestock and pets alike, need more protection than they used to. I'm not betting on one fly. I'm betting on the company that sells the protection against all of them.