There’s no question that the 2014 Ebola outbreak is spreading. The question now is how far will it spread and how well can governments and healthcare authorities contain the outbreak?
If you want to know what the market thinks about the Ebola outbreak try looking at the charts of Lakeland Industries (Nasdaq: LAKE) and Alpha Pro Tech (NYSE: APT).
Shares of Lakeland Industries and Alpha Pro Tech rose 48% and 35% respectively in Monday’s trading session while the S&P 500 fell by 1.65%. If you’d bought shares of either company last Monday you would’ve already tripled your money.
What do these companies make that has investors in such a frenzy? More on that in a minute.
In early August I wrote about a company called BioCryst Pharmaceuticals (Nasdaq: BCRX) which has an experimental drug that has shown some promise for treating Ebola. But the company’s drug isn’t quite ready for primetime and the market seems to have wised up to this. Though the stock was up 20% in the two weeks before I published my article, it has since fallen almost 25% since.
Pharmaceutical companies aren’t the only way to gain exposure to Ebola-driven market trends. Let’s talk about protective suits.
There have now been several US-bound airliners that have declared medical emergencies because of passengers displaying Ebola-like symptoms. Just yesterday an Emirates flight landed at Boston’s Logan Airport carrying five passengers displaying “flu-like” symptoms. The highly publicized incident no doubt fueled the huge gains in these two stocks yesterday during the day and in after-hours trading.
These planes are met by fire trucks, ambulances, cell phone cameras and specially trained hazardous materials – hazmat – teams.
And what does every hazmat team wear? You may have already guessed that they wear protective suits made by companies like Lakeland Industries and Alpha Pro Tech.
These protective suits, gloves, masks and glasses are meant to keep first responders and healthcare workers safe from exposure to – in this case – Ebola. This protective gear is only used once and then is disposed of to prevent contamination.
Therein lies the reason that investors are chasing these stocks higher and higher.
Not only do healthcare workers and first responders depend on this gear to do their jobs safely in an outbreak setting but the suits are also single-use. Why gamble on pharmaceutical stocks that might or might not have a product that can actually treat Ebola? The alternative is to own shares of two companies that produce the protective gear that is vital to the care and containment of the Ebola virus.
Did I mention that the suits are thrown out after each use?
As the number of Ebola victims grows the number of healthcare workers needed to treat them rises even faster. And as these numbers grow so too does demand for protective suits.
That’s why a stock that traded for $3 per share last week is now up over $10.
Source: Google Finance
And why Lakeland Industries is up more than 300% in the last month alone.
Source: Google Finance
Even though hazmat suits strike me as an excellent way to invest in the powerful market trends driven by the Ebola outbreak, I have a hard time getting behind stocks that have risen this much this fast.
Buying these stocks is a gamble.
It could very well pay off handsomely, as this Ebola outbreak shows no signs of slowing. But buying high-flying stocks is a great way to get burned.
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