Gloves: Tutup lampu! Extend! EXTEND!!

Glove stocks has taken a heavy beating since yesterday. Some say the party is over. The captain has turned on the bright, florescent ceiling lights and is presenting you with the eye-watering bill for the night. “Boss, your credit card rejected”, he demurs politely, making sure to leave the door slightly ajar so his biggest and ugliest “waiters” can be seen outside, waiting to beat spare change out of your pockets should you and your friends be unable to cough up the amount due.

You squint at the invoice, pupils dilated from the copious amounts of KTV juice you ordered throughout the night, as you ponder your next move. Is it time to pay the piper? Or do you order a fresh jug of laced Ribena and kick the Donnie Downer captain out of your private room while shouting “Tutup lampu! Extend! EXTEND!!”?

Let us look at this objectively, using reason and evidence. Here are 5 reasons I’m bullish on gloves:

#1 COVID-19 cases are increasing

COVID-19 infections are steadily rising all over the world. Malaysia has seen a fresh new spike from the third wave of this pandemic. It’s not going to go away in the near future. Glove demand will still be very strong moving forward.

#2 Elevated ASPs till 2021

The Average Selling Price of gloves has steadily increased these few months. The spot price has risen from USD80-130 to USD100-150 per 1,000 pieces. This will translate to better profits in Q4 2020 and in 2021.

#3 No oversupply concerns

The Big 4 glove stocks have their inventory fully booked till end 2021. The new players will not be producing in the near future – the closest one is MAHSING, targeted for April 2021. That’s over two quarters away! Most of the new upstarts wouldn’t be able to produce significant amounts of inventory anyway.

#4 No visibility on COVID-19 vaccine availability

Except for a few countries like China forging ahead with limited public vaccinations in spite of murky efficacy and safety studies, most countries do not have a near-term plan for mass vaccinations yet. Recently, there are also troubling reports of deaths and serious complications related to COVID-19 vaccines. Some of the vaccine candidates using adenovirus 5 (Ad5) could result in a higher risk for HIV infection! Take note cheong kakis.

#5  Glove wearing awareness to increase

The importance of wearing proper nitrile and latex gloves for medical procedures is increasing. There’s plenty of room for gloves to grow in India and China. Elevated ASPs will decrease after COVID-19 cases subsides, but the increased demand will make up for it.

During the massive glove selloff yesterday, Top Glove hit a recent low of 8.585 before stabilizing around the support of 8.9. All the glove counters saw a similar rapid decline during morning trade. I took this delicious opportunity to invest more into Top Glove and Supermax, averaging down my positions. I’ve bought (and sold) the Big 4 glove counters multiple times and this time I will ride it to the beautiful summit.

Be fearful when others are greedy and greedy when others are fearful

Warren Buffet

Remember September 10^th when there was a gap down and massive selloff for gloves (and throughout Bursa)? Don’t you wish you had the testicular fortitude to dump in all your extra money into glove stocks then? If you missed that opportunity, here’s your chance!

Hantam dia kau kau. Don’t kasi chance. Scalp that mf and smash their face into the pavement. Hoot 9 ee, fellow financial gangsters.

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