The novel coronavirus has created new categories of stocks that were practically unheard of before. One of these niche categories could be called “protective-gear stocks” or even more specifically, “face-mask stocks.” An obvious candidate for this niche would be Alpha Pro Tech (NYSEMKT:APT) stock.
This particular stock is a real mover. It’s gone from around $3.50 at the beginning of the year to over $25 in late February. Now it’s back down to the $12 level, but that’s a chance to own APT stock at a discount.
Meanwhile, the persistent demand for face masks suggests that a share-price rebound may be right around the corner.
A Supply-Demand Imbalance Hits APT Stock
Hardly anyone would dispute that protective face masks are a hot item, but not everyone appreciates how strong the demand actually is. This month, the Centers for Disease Control and Prevention (CDC) officially released a recommendation that all people should wear face masks when they’re out in public.
Of course, the rush of demand for face masks started before the CDC made that recommendation. Over 580,000 Americans have tested positive for the coronavirus and Johns Hopkins has reported over 23,000 fatalities. Without a doubt, the public is going to try to get their hands on face masks by almost any means necessary.
Moreover, medical institutions are in dire need of surgical and N95 face masks. In fact, a survey from the watchdog of the U.S. Department of Health and Human Services revealed that hospitals throughout the United States are facing delays of up to six months when ordering face masks.
America largely sources its face masks from China. The most recent trade data from the United Nations shows that in 2018, around half of the global supply of face masks, totaling $11.7 billion, came from China.
At the same time, however, the supply of face masks from China is falling sharply. Incredibly, U.S. imports of protective face masks from China decreased 20% in February 2020 compared to the same month last year. This represents the lowest level of China-to-U.S. imports of these face masks in any February since 2015.
A Small Company Takes on a Big Responsibility
There are a couple of main factors explaining why the U.S. can’t count on China to supply as many protective face masks as it needs right now. The first factor is that China has enacted export restrictions on its face masks. This was done so that China can provide these masks to its own residents and medical institutions.
The other factor is that much of China’s economy is shut down due to the spread of the coronavirus. This shutdown in activity includes some of the manufacturing plants in China that had previously supplied protective face masks.
Fortunately, there’s a small company that’s ready and able to step up to the plate. Alpha Pro Tech is currently ramping up production of its protective face masks. By late summer, the company projects that a “phase 2” expansion will be under way.
As you would expect, Alpha Pro Tech has seen a rash of orders for face masks recently. The company reported that between January and April, Alpha Pro Tech booked approximately $36.7 million worth of orders for its N95 face masks.
Additionally, Alpha Pro Tech has experienced a strong increase in incoming orders for its face shield products. A year ago, just $1.6 million worth of orders for the company’s face shields came in. This year, it’s up to $11.6 million. Plus, Alpha Pro Tech reports strong demand for lab coats, gowns, bouffant caps and shoe covers.
My Final Word on APT Stock
Sometimes an imbalance between supply and demand can create rare opportunities. In this case, the imbalance between the supply and demand for protective face masks should benefit APT stock.
Any doubters can simply examine the data as the protective-gear market desperately needs a company like Alpha Pro Tech to fill the void.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.