Aside from large stacks of toilet paper, perhaps the single-most prominent image of the novel coronavirus is the N95 respirator mask. This otherwise mundane piece of personal protective equipment (PPE) suddenly brought industrial giant 3M (NYSE:MMM) into focus. But due to controversies in rolling out face masks to American healthcare customers, smaller rivals like Alpha Pro Tech (NYSEAMERICAN:APT) have also emerged. And very few securities have blasted off like APT stock did this year.
Nevertheless, it’s hard not to be skeptical about Alpha Pro Tech. Unless you were a die-hard healthcare investor to begin with, chances are, you’ve never heard of APT stock until recently. But with “PPE” becoming part of the lexicon of our new normal, along with “social distancing” and “flattening the curve,” the embattled organization just received a lifeline, albeit a cynical one.
Now, I’m not here to criticize APT stock for being what it is. If you were astute enough to get ahead of this pandemic, you deserve your just rewards. That’s how the markets work.
But what about now? On one hand, you can argue that global COVID-19 cases are staggered. Obviously, China went first, while many parts of western Europe and the U.S. followed close behind. Now, it seems the developing world, such as the BRICS nations (excluding China) are lagging us. Therefore, APT stock theoretically has some upside remaining.
On the other hand, Alpha Pro Tech shares have a history of wild and disappointing trading. For instance, APT stock jumped higher during the H1N1 pandemic and the Ebola crisis. Neither outbreak was enough to sustain demand for the PPE company. With that kind of track record, investors are rightfully concerned.
APT Stock Might Get Support from Behavioral Shift
While I acknowledge the severe risks associated with Alpha Pro Tech, I also don’t want to dismiss the opportunity completely. Sure, APT has previously failed to live up to its outbreak-inspired potential multiple times. But in all sincerity, this time could be different.
First, let me address the glaringly obvious point: Coronavirus has affected us in ways that no other disease in modern history has. Of course, high-profile conditions such as cancer and HIV-AIDs have killed countless millions worldwide. Yet despite their grim body count, they’ve never shut down economies.
Even infectious diseases like SARS or H1N1 have not sparked worldwide lock-downs. Unfortunately, these events could spark an economic hit similar to the Great Depression.
During that awful period, Americans endured such deep-seated pain that it caused lasting or permanent behavioral shifts. Here are three that stood out to me:
- An increase in crime;
- Rise in suicide; and,
- Delayed marriages and loss of higher-education access
Not surprisingly, we’re seeing these exact changes right now. Recently, the FBI warned against an uptick in racially motivated violence against Asian-Americans. Due to forced isolation and job losses, compromised mental health has led to increased incidence of suicide. And delayed marriages and financially practical access to higher education are trends that millennials and Gen Z have already hit those cohorts.
So, major crises change our behaviors — that’s not up for debate. My argument, though, is that post-coronavirus, we will have a new attitude toward PPEs. And that should provide a longer-term pathway for APT stock.
Also during the Great Depression, hunger was a chronic theme. That’s why Americans who lived through that era may have hoarding tendencies. For us, I think we’ll look at face masks and PPEs in a new light. Nothing inspires change like going without.
We’re Not Done with Our Coronavirus Crisis
Finally, I want to address the point about APT being a single-catalyst stock. In many ways, it is. However, we’re not done with our present COVID-19 crisis.
Sure, recent reports suggest that we’re making significant progressing in flattening our curve. But we don’t want to forget that we also have a geopolitical crisis on our hands. Once the coronavirus fades, the bitter diplomatic memories will remain.
I’m not just talking about President Trump’s insistence on calling this pandemic the “Chinese virus.” Instead, as a Wall Street Journal op-ed argued, forcing companies like 3M to divert supplies lawfully contracted to foreign countries back to the U.S. could have diplomatic repercussions.
It’s an interesting point because the U.S. doesn’t control its medicinal supply chain — China does. Therefore, if China wanted to retaliate, they could do so.
For the purposes of this article, I’m not here to push one political argument over another. Rather, from an investor’s perspective, this PPE situation probably won’t fade with the coronavirus. Therefore, if you’ve got the iron stomach, you may wish to consider a measured bet on APT stock.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.