With how much the novel coronavirus has changed the world, there were bound to be a few unlikely investments to become Wall Street’s flavor of the moment. One of those is Alpha Pro Tech (NYSEAMERICAN:APT), a company specializing in face masks and other personal protective equipment (PPE). As I’ve mentioned multiple times, I don’t like coronavirus plays like APT stock. But has President Trump changed my mind?
Since the crisis began, Trump has consistently (and to his political opponents, notoriously) refused to wear a mask. Taking ideological opinions aside, I can understand the strategic move here. Frankly, the administration has more to lose promoting the image that the coronavirus is serious. Therefore, Trump may have made a calculated decision to avoid wearing a mask.
Recently, though, the President has changed his tune. Earlier this month, on a visit to Walter Reed National Military Medical Center, Trump was first seen publicly wearing a mask. And it was a photo from this event that he tweeted on Monday, claiming that it was “Patriotic to wear a face mask when you can’t socially distance.” Naturally, APT stock enjoyed a nice 5% pop on the gesture.
Further, shares may not be done moving upward. Along with not wearing a protective covering for most of this crisis so far, President Trump has repeatedly downplayed its seriousness. With Trump wearing a mask comes a tacit acknowledgement that the coronavirus is something to be concerned about, boosting the speculative case for APT stock.
In addition, new daily infections have jumped to record levels in the U.S. This has prompted many states to roll back their reopening, suggesting a return of our quarantine practices.
Don’t Buy into the Hype for APT Stock
Admittedly, most of the surface data appears positive for APT stock, if not overwhelmingly so. From what many medical experts are saying, the nation opened too soon and without proper safeguards. This latter point is especially significant because Alpha Pro Tech specializes in some of those safeguards.
And because cases are racking up in multiple new hot spots, a possibility exists that we may have to “live” with coronavirus, at least until a vaccine arrives. Again, we have another catalyst for APT stock.
Still, I wouldn’t get caught up in the hysteria. First and foremost, there is no strong scientific consensus on the efficacy of face masks. While institutions like the Mayo Clinic note that masks help in slowing the spread of Covid-19, it’s careful to note that masks plus other mitigation measures such as social distancing offer the best protection.
Also, N95 respirators are technically superior because they block out 95% of very small particles. However, good luck getting one! That’s why buying 3M Co (NYSE:MMM) purely for their N95’s hasn’t been a compelling investment lately.
But even these masks aren’t immune to problems associated with misuse. According to Statnews.com, N95 respirators only work “if there is a tight seal around the face, something that is not possible in someone with a full beard.”
Second, APT stock has a competitive risk. Due to tremendous demand, companies like Target (NYSE:TGT) now offer face masks. No, they’re not as effective as N95 respirators or other advanced PPEs that Alpha Pro Tech may sell.
However, cloth masks are readily available and they’re cheap. Some of the truly protective gear requires gobs of cash — something that many Americans just don’t have right now due to the health and economic crisis.
Pandemic Plays Are the Worst
All this brings me to my original point that basing your investments off pandemics is not a great strategy. A health crisis of this magnitude comes once every blue moon. There’s just no way to predict these things with any reliability.
As well, the investment narrative will collapse as soon as the threat fades. You don’t have to look far for examples as APT stock provides its own cautionary tale. During the Ebola crisis, Alpha Pro Tech shares went ballistic, not dissimilar to what we’re seeing today. Yet almost as quickly, the market value plummeted.
Of course, in this heightened state, many traders will do dumb things. That’s the allure behind Alpha Pro Tech right now. But this is a very treacherous game to play, which is why I urge readers to not get sucked in.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.