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Congrats
all on the strong rebound of the Glove sector. For those who held
through the selloff last week, you deserve the pat on the back.
This
week is a very important week for the Glove sector. Whatever the
outcome, I think it's important to know everything in life there is
always going to be different voices & opinions. We cannot expect
everyone to think like us and that's why humans are all unique and
different.
I think how the investment
community views the Glove sector is diverse. But for the stock to go up
and share price to rally, the majority must believe in it for the buying
momentum to outweigh the selling momentum.
I
do not know what will happen in future but my view is strongly in favour
of gloves for many reasons including but not limited to :
1. Strong earnings visibility for the next 12 months (min) with / without vaccine
2. Shortage is acute especially for nitrile Gloves
3. ASP price increased has been and will remain elevated for some time
4. Structural change in demand and hygiene habits
5. Monopolistic position of Malaysia supply to the Global markets
6. Valuation is still lagging actual earnings growth and it will be reflected in coming quarters
7. Huge cash inflow for Glove players. Cash is king especially during weak economic environment.
8. No other better sector / industry / stocks for alternative investment opportunities in the near term.
9.
Some local funds / local investors may not believe in the Glove sector.
But I believe in it strongly. My belief is objective based on data,
facts and numbers. Not emotions. There is deep value in Glove sector
especially those with strong quality management like Hartalega,
Riverstone, Kossan, Top Glove.
10. Lastly, the
Glove sector is very relatable to retail investors who can touch, feel
or understand the nature of the business due to usage in daily life.
I
remembered in 2008, during the Global Financial Crisis, before Lehman
Brothers collapsed, they went to Warren Buffet for help to save them
from bankruptcy. Warren Buffet didn't save Lehman Brothers after
assessing their books which contained too many toxic assets. But he did
go in big to others like Bank of America, Citigroup, Goldman Sachs etc.
He advocated "Buy America". He believe in US's resiliency and ability
for the US financial markets to remain world leader despite the mess
they caused.
I am going by the same
playbook. I advocate "Buy Malaysia". The Glove sector is one of the few
things as a Malaysian we should be proud of. I believe this sector has
shown its ability to defy adversity, rise against odds to become a
global leader. This is one of the few sectors that Malaysia will remain a
global leader post Covid-19 and for many years to come.
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Food for thought:
