It’s official: Ebola is in New York. That’s clearly bad news for New York and the broader CDC-led containment efforts. But it’s good news for speculative “Ebola stocks” like iBio (IBIO) and Lakeland Industries (LAKE), which seem to thrive as the threat of an all-out Ebola outbreak becomes more real.
Let’s take a brief look at these two stocks and see if investors should pay them any mind in light of the New York City case.
Ebola in New York City — Stock #1: iBio (IBIO)
YTD Return: 420%
Decline From October High: 45%
No doubt about it, iBio is definitely a make-or-break Ebola stock, and shares jumped as much as 11% in early morning trading today. If you’re legitimately worried about an all-out Ebola outbreak and are looking to put a little money away somewhere in case it becomes an epidemic, IBIO stock is actually not a bad place to look.
I don’t usually recommend stocks like IBIO, which has $205,000 in revenue in the last 12 months, loses money, and trades at about 536 times sales. And let me be clear — I’m not recommending you add IBIO stock to your portfolio today. It’s just an interesting and potentially lucrative short-term Ebola play, that’s all.
I still think that longer-term investors not trying to day trade Ebola news should stay far away from this one, despite the fact that the small biotech offered the government assistance in developing an Ebola drug.
Ebola in New York City — Stock #2: Lakeland Industries (LAKE)
YTD Return: 179%
Decline From October High: 50%
LAKE stock didn’t have quite the same reaction to the New York City Ebola case that iBio did, as shares of the Ronkonkoma, New York company seesawed in early action, gaining 3% initially before slumping into the red as the morning progressed. Like iBio, I think LAKE stock trades at gaudy valuations, and although the hazmat suit-maker does have a legitimate business that logs sales between $90 million and $100 million annually, Wall Street is still too optimistic about this stock.
I’ve still got to agree with myself when I advised investors on October 14 to stay far away from Lakeland Industries stock. Of the many reasons I think this Ebola stock is a nightmare waiting to happen, it all comes down to one point:
“Sales have been on the decline for the past four consecutive fiscal years. Even though it seems like the recent outbreak is enough to cause that trend to reverse in FY2015, Lakeland’s truly remarkable inability to squeeze any sort of consistent profit out of its roughly $90 to $100 million in annual sales is downright depressing.”
In the 10 days after that article was published, LAKE stock lost nearly half its market value, plunging 49%. Don’t stick around to see it fall another 49% just because Ebola is in New York.
As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid.