Amid the devastation from the novel coronavirus comes changes to our lexicon. Today, Americans are all too familiar with the term “social distancing.” But another phrase has far more crucial implications: personal protective equipment (PPE). With medical professionals and first responders throughout the nation struggling to address the pandemic, Lakeland Industries (NASDAQ:LAKE), a hazard-protection gear manufacturer, has come into the spotlight. As a result, it’s no wonder that Lakeland Industries stock has skyrocketed.
At the beginning of the year, shares were trading hands just below $11. At its intraday peak, Lakeland Industries stock was approaching the $30 level. Although it didn’t quite get there, the surge in momentum symbolized the arrival of a paradigm shift. With the rapidly rising equity price came the realization that this was no longer a foreign problem.
To further emphasize our new normal, hospitals in hard-hit states became quickly overwhelmed with thousands of daily Covid-19 cases. Although the Trump administration made appeals to companies like 3M (NYSE:MMM) and Honeywell (NYSE:HON) to provide critical PPE, the virus spread faster than many experts anticipated. Unfortunately, this led to hospitals in New York having to come to grips with the fact that they must do without protective equipment.
Given the tremendous humanitarian need, this circumstance naturally bolstered the profile of Lakeland Industries stock. Essentially, the coronavirus forced all PPE companies to think in patriotic terms. Furthering this concept, President Trump in early April invoked the Defense Production Act to prevent the export of surgical masks and gloves.
Later, the federal government doubled down on this warning. While this environment helps Lakeland Industries stock, the longer-term outlook is questionable.
Lakeland Industries Stock No Longer Has Low-hanging Fruit
In early March, my colleague Louis Navellier mentioned that LAKE featured solid fundamentals before the pandemic. Obviously, the company today carries the same fundamentals along with a huge uptick in technical sentiment. Further, more investors will likely continue to keep tabs on Lakeland Industries stock after this virus passes.
Certainly, I don’t think shares will go to zero. As Navellier stated, the company was relevant before Covid-19 and will be so afterward. Indeed, whether we go back to the old normal or enter a new one, we won’t soon forget about PPEs.
But does that mean you should buy Lakeland Industries stock at this point? I have serious reservations, primarily because the low-hanging fruit is all gone.
For this argument, a visual aid is most appropriate. In this chart, I compare Lakeland Industries stock to worldwide coronavirus cases. As you can see, Wall Street early birds were closely watching developments in China back in January of this year. Gambling on a big outbreak, they bid shares up to $16.10 from $10.97 — a near-47% increase.
Click to Enlarge
However, sentiment quickly declined as it appeared at one point that the coronavirus could be contained in China. Soon, though, it became apparent that the crisis would deteriorate into a pandemic. In the second half of February, shares surged to $21.11 from $12.05 — a 75.2% lift.
At the time, the move wasn’t completely unjustified. Since the end of February, the coronavirus has virtually impacted every corner of the world.
However, from late February to April 7, global coronavirus cases increased 1,591%. A big jump, yes, but consider that from late January to late February, cases increased nearly 14,500%.
In other words, you’d be buying LAKE toward the end of this crisis.
Just Do the Math
Of course, I’m not an epidemiologist and I don’t claim to know when this crisis will fade exactly. But that’s not my point. Rather, I’m discussing the sentiment toward LAKE stock and how it relates to Covid-19 trends.
As you can see from the chart, sentiment for the stock has consistently led the rise in coronavirus cases. To put it another way, the massive burst in market value came from investor anticipation. In hindsight, these speculators accurately predicted the first two waves of Covid-19 infections.
But will the third time be the charm? I doubt it.
You don’t have to be a medical expert to know that all health-related hazards eventually fade with time. Mathematically, the cases have already sharply decelerated. If you buy Lakeland Industries stock now, you’re gambling that cases will continue to rise sharply.
Yes, anything is possible. But with most U.S. jurisdictions (and several countries) imposing emergency shelter-in-place orders, that’s a bet that I’m not willing to take.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
