<p>As a specialist in personal protective equipment (PPE), Alpha Pro Tech (NYSEMKT: APT) is one of the few lucky companies that has had an incredibly robust performance during the first three months of this year. With all the panic over face masks, the APT stock has naturally shot up. Of course, the extreme enthusiasm has led to concerns about long-term profitability.
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However, President Donald Trump may have alleviated at least some of this anxiety. Throughout this crisis caused by the new coronavirus, Trump has repeatedly refused to wear a face mask. Of course, this frustrated many public health officials. Essentially, the US government ran a story of mitigation and social distancing, while its most visible representative opposed the message.
Recently, however, Trump publicly wore a mask for the first time when he visited Walter Reed National Military Medical Center. Later, he tweeted his support for its use and suggested that it was “patriotic” to cover. It was a face to be sure and a cynical on it. Still, if you are long APT stock, you had to like what you saw.
Most importantly, this recognized that the coronavirus is serious. Once again, throughout this crisis, the President has downplayed the problem. Of course, members of his administration have not helped in this matter. Now we are obviously – hopefully – on the same page to beat this virus on a unified front.
There is also a political catalyst for APT stocks and for companies with PPEs, such as 3M (NYSE: MMM). In recent times, we have caused people to lose their constitutional rights. Perhaps, with the commander openly supporting face masks, his ardent apa-se, apa-do followers will fall in line.
The APT share is an interesting momentum trade
But I do not want to exaggerate the case for APT shares. As with other coronavirus-driven assets, I’m not entirely comfortable with Alpha Pro Tech’s long-term proposals. Let’s face it – it’s mostly about speed. But what a convincing it is!
According to ePallet, a business-to-business technology and logistics service that makes it easy and efficient to sell wholesale food on the pallet, the broader retail category that has witnessed the largest increase in dollar-based demand during this crisis is medical supplies.
And this is not a trend that an isolated source is witnessing. According to a Washington Post-ABC News survey from the beginning of last month, most Americans are more worried about the spread of Covid-19 than about the economy. If you think about it, this is an astonishing statistic because unemployment is still in double digits. In addition, the first weekly unemployment claims continue to be millions.
Rising Cases, Rising Deaths
Of course, the latest news about rising coronavirus cases only stimulates increased purchases of medical devices such as PPE. In a recent CNBC report, Texas and Florida have reported “record average daily deaths from coronavirus when hospital stays also rise.” It is an accusation against the typical conservative counter-argument that while cases have risen, deaths have not.
Of course, this reinforces the bullish fall for APT stocks. When states begin to pause or roll back their reopening – and we are talking both red and blue states – the American people probably understand a point: If we do not deal with the pandemic effectively, our economy will never come back.
Frankly, I’m not sure what the answer is right now. But from APT’s perspective, it does not matter what I think. That’s what most Americans think. And if they believe that the coronavirus is a serious threat is the “good” news for APT.
Is there a long-term issue for Alpha Pro Tech?
As I indicated earlier, APT shares are a speculative investment and you should primarily treat it as such. First, most investors probably did not care about Alpha Pro Tech until the pandemic struck. This has also been a company that has run a temporary wave of previous epidemics, only to see its market value fall when the health threat disappeared.
But around mid-April, I raised the possibility that APT stocks could benefit from a coronavirus-driven “behavioral shift.” Just as the Great Depression changed the lifestyle and attitudes of the generations affected by this disaster, the Covid-19 pandemic can also mark those of us who are “aged” permanently.
Going forward, we can see personal protective equipment in a completely different light. I bet you anything that a good chunk of the American population will refill N95 breathing apparatus, anyway. And this is not like buying earthquakes or tornado preparations, which only affect certain geographical locations. No, Covid-19 affected us all – rich, poor, black, white, and everyone in between.
So it’s possible, but obviously not guaranteed, that this time is different for Alpha Pro Tech. But if you look at APT as a trade and you have the discipline to reduce your losses if things go wrong, the current circumstances seem quite favorable.
Josh Enomoto, a former senior business analyst at Sony Electronics, has helped broker larger contracts with Fortune Global 500 companies. In recent years, he has delivered unique, critical insights for the investment markets, as well as for various other industries, including legal, construction management and healthcare. At the time of writing, he had no position in any of the above securities.