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The Ebola crisis and APT

BENJ GALLANDER and BEN STADELMANN

 

Friday, December 5, 2014

 

Back in June 2012, we wrote about Alpha Pro Tech (APT), at that point a rather sleepy maker of disposable protective gear such as gowns, shoes and bouffant caps primarily for hospitals. A second division makes weatherization products for buildings. On a big day, the volume for the company would chug over 100,000 shares, but mostly it would trade far below that level. How off-the-radar was this outfit? When Benj went to the AGM, except for management and their wives, he was the only person to show up. Talk about having a private audience with the big cheeses!

 

The enterprise had been acquired a number of months before for the President’s Portfolio at the lowly price of $1.17, with an initial sell target of $3.34. The thinking was that this stock would jump when a pandemic scare was in the air, such as occurred with SARS and H1N1. When that would happen was unknown, that it would ensue at some point was pretty much a lock.

 

When this disease struck and became front page news, the stock price went ballistic. On the last day of September, 58 per cent of the position was sold at $3.34 and the company traded almost three million shares. The float is only 14.9 million. But that was simply the opening act. Ten days later, the second sale was at $6.96, with trading volume almost reaching an outlandish 39 million shares. The following day traded better than 38 million shares and the peak was reached the day after when almost 43 million shares turned over, almost three times the float! The stock price reached its summit at $10.73 but unfortunately the remaining 21 per cent of our original position was not offed. The thinking was that perhaps $11 and change was obtainable, but it was not to be.

 

After the frenzy, the stock price plunged, touching a low of $2.66 on November 24. It has rebounded since then to around $3 – a far cry from the earlier heights but still a healthy gain from the original purchase price.

 

So where does it go from here? Revenues and income continued the upward trend in the most recent quarter and those results were before the Ebola scare took off. There is no debt. The share count has dropped from north of 22 million in 2009 to less than 19 million due to a share buyback. On the negative side, insiders have been selling, but they still own better than 16 per cent of the corporation.

 

The business announced a “substantial increase” in October orders. In all likelihood, November will be even better. That bodes well for the next quarterly numbers, to be reported towards the end of January. It would not surprise us if the stock price jumps in anticipation of better results. Naturally, if Ebola becomes front page news again that could propel the stock price back up further and faster.

 

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