KYY

Top Glove: Investors must not sell


Koon Yew Yin 19 Aug 2020 

Yesterday, its share price shot up Rm 3.66 per share. As a result, many investors asked me if they should sell their holdings for the following reasons:

1 They are very happy to take profit.  

2 They think the price will soon drop. 

3 The price has already gone up more than 600% in the last few months.

4 The price cannot continue to go up higher and higher.  

My short answer is do not sell.

The Covid 19 pandemic is affecting everybody’s livelihood and all the listed companies with the exception of medical glove stocks and other medical products for the prevention of the virus. As a result, all investors especially Investment Banks have to sell almost all their holdings to buy glove stock. That is why the daily traded volume is tens of million shares. 

During this pandemic, the demand for medical gloves far exceeds supply and all the glove makers can easily increase their selling price for their gloves. Investors must remember that the additional selling price is pure profit because it does not involve production cost. 

Currently, there are 22.2 million Covid 19 cases and 780,000 deaths in the world. There are 5.49 million Covid 19 cases and 171,000 deaths in the US. Unfortunately, all these figures are still spiking.      

Many scientists predicted the pandemic will continue for at least another 1 or more years although vaccine is under phase 3 testing. Even if the vaccine is finally approved by FDA, it will take a long time to vaccinate everybody in the whole world to be effective. 

Yesterday at the EGM for the approval of 2 bonus shares for every 1 share, investors were told that the company has been increasing the selling price every month. 

Investors must have the foresight to sell that the company will continue to report increased profit in the next few quarters. 

Investors must not sell their holdings so soon.