As a specialist in personal protective equipment (PPE), Alpha Pro Tech (NYSEMKT:APT) is one of the lucky few companies that enjoyed an incredibly robust performance in the first three months of this year. With everyone panicking over face masks, APT stock naturally skyrocketed. Of course, that extreme enthusiasm has led to concerns about longer-term viability.
However, President Donald Trump may have eased at least some of this anxiety. Throughout this crisis caused by the novel coronavirus, Trump has repeatedly refused to wear a face mask. Of course, this frustrated many public health officials. Essentially, the government of the U.S. was pushing a narrative of mitigation measures and social distancing, while its most visible representative was contradicting the messaging.
Recently, though, Trump publicly wore a mask for the first time when visiting Walter Reed National Military Medical Center. Later, he tweeted his support for its usage, suggesting that it was “patriotic” to cover up. It was an about-face to be sure and a cynical one at that. Still, if you’re long APT stock, you had to like what you saw.
Most significantly, this was an admission that the coronavirus is serious. Again, throughout this crisis, the president has downplayed the problem. Certainly, members of his administration have not helped in this matter. Now, we’re apparently — hopefully — on the same page to beating this virus on a unified front.
As well, a political catalyst exists for APT stock and for companies with PPE businesses, such as 3M (NYSE:MMM). Lately, we’ve had people going nuts about their constitutional rights. Perhaps, with the Commander-in-Chief openly supporting face masks, his ardent monkey-see, monkey-do supporters will fall in line.
APT Stock Is an Interesting Momentum Trade
However, I don’t want to overstate the case for APT stock. As with other coronavirus-fueled assets, I’m not entirely comfortable with Alpha Pro Tech’s longer-term proposition. Let’s face it – it’s mostly a momentum trade. But what a compelling one it is!
According to ePallet, a business-to-business technology and logistics service that makes it easy and efficient to sell wholesale food by the pallet, the broader retail category that has witnessed the biggest spike in dollar-based demand during this crisis is medical supplies.
And that’s not a trend witnessed by an isolated source. According to a Washington Post-ABC News poll from early last month, most Americans are more worried about the spread of Covid-19 than they are about the economy. If you think about it, this is a staggering statistic as the unemployment rate is still in double digits. Additionally, initial weekly jobless claims continue to number in the millions.
Rising Cases, Rising Deaths
Of course, the latest news on rising coronavirus cases only incentivizes increased purchases of medical supplies like PPE. In a recent CNBC report, Texas and Florida have reported “record average daily coronavirus deaths as hospitalizations also rise.” That’s an indictment against the typical conservative counterargument that while cases have risen, deaths have not.
Naturally, this bolsters the bullish case for APT stock. As states begin pausing or rolling back their reopening — and we’re talking both red and blue states — the American people are likely understanding one point: If we don’t deal with the pandemic effectively, our economy will never come back.
Frankly, I’m not sure what the answer is at this point. But from APT’s perspective, it doesn’t matter what I think. It’s what most Americans believe. And if they believe the coronavirus is a serious threat, it’s “good” news for APT.
Does a Long-Term Case Exist for Alpha Pro Tech?
As I alluded to earlier, APT stock is a speculative bet and you should primarily treat it as such. For one thing, arguably most investors didn’t care about Alpha Pro Tech until the pandemic struck. Also, this has been a company that has ridden a temporary wave on prior epidemics, only to see its market value plummet as the health threat faded away.
However, around mid-April, I brought up the possibility that APT stock could benefit from a coronavirus-driven “behavioral shift.” Just like the Great Depression changed the lifestyle and attitudes of the generations that suffered through this catastrophe, the Covid-19 pandemic could also mark those of us who are “of age” permanently.
Moving forward, we may view PPE in a completely different light. I’ll bet you anything a good chunk of the American populace will stock up on N95 respirators, just in case. And this isn’t like earthquake or tornado preparation purchases, which only impact certain geographic locations. No, Covid-19 impacted all of us — rich, poor, Black, white and everybody in between.
So, it is possible, though obviously not guaranteed, that this time is different for Alpha Pro Tech. But if you’re looking at APT as a trade and you’ve got the discipline to cut your losses if things go awry, the present circumstances appear quite favorable.
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.