KYY

Glove stocks are good buys


Koon Yew Yin 29 June 2020

Covid 19 pandemic is affecting all the listed companies with the exception of medical products such as glove and other medical products to prevent contacting the   coronavirus. 

Currently due to Covid 19 pandemic, the demand for gloves far exceeds supply. As a result, all glove makers are increasing the selling price of their products. You must remember, the increased price does not cost the company anything. It is pure profit. 

Supermax has its own sale outlets in US and many other countries. The company can increase the selling price quite quickly. If the demand continues to exceed supply Supermax can double the sale price.       

Individual small investors can buy and sell much quicker than institutional investors. They can easily sell away all their non performing stocks to buy glove stocks. 

As all institutional and fund managers who usually have many counters in their port folios, they have to sell most of them to cut loss. With so much of sale proceeds, they are buying glove stocks aggressively. As a result, all the gloves stocks have been shooting up like rockets in the last 3 months. The daily huge traded volume is unprecedented. 

If you Google, you can see that almost all institutional investors cannot beat the stock market index especially during the Covid 19 pandemic. The reason is that being qualified accountants they always select stocks based on the historical accounts of the companies. Moreover, they cannot easily sell away their non performing stocks because they are holding so much. 

Institutional investors are qualified accountants who always look at the company’s asset backing, NTA, cash flow, minimum debts, cash in fix deposit and historical earnings. They think that the company will soon distribute some of its cash and assets to the shareholders. No company will do that. They do not concentrate on the company’s future profit growth prospect which is the most powerful catalyst to push up share price.   

As I said earlier, the demand for gloves far exceeds supply and all glove makers are making more and more profit until Covid 19 is under control. Many scientists predicted the pandemic will continue for at least another year in spite of the fact that the vaccine is being tested on human. The Federal Drug Authority (FDA) will take some time to approve the use of vaccine. 

All medical care workers have been using gloves, even if Covid 19 is under control they will continue to use gloves for self-protection.   

As you know, all the glove companies have reported improved profit. I believe Supermax’s next quarter profit will be unprecedented.