Should investors pick cheap glove stocks or expensive tech stocks?
KUALA LUMPUR (April 24): Glove and technology stocks on Bursa Malaysia have been outperformers since the Covid-19 outbreak. Given the global shortages of rubber gloves and semiconductor chips, both sectors are still being monitored closely by investors.
Judging from their historical price-earnings ratios (PERs), it is fair to suggest that the valuations of glove stocks appear to be cheap, while those of semiconductor stocks seem expensive.
As it is, three of the Big Four rubber glove makers, namely Top Glove Corp Bhd, Kossan Rubber Industries Bhd and Supermax Corp Bhd, as well as their smaller rivals are currently trading at single-digit PERs compared with over 100 times at their peaks last year.
In comparison, the Big Four outsourced semiconductor assembly and test (OSAT) companies — Inari Amertron Bhd, Malaysian Pacific Industries Bhd (MPI), Unisem (M) Bhd and Globetronics Technology Bhd — are trading at historical PERs of between 30 times and 50 times.
Meanwhile, ViTrox Corp Bhd, Pentamaster Corp Bhd, Mi Technovation Bhd and Greatech Technology Bhd — the Big Four automated test equipment (ATE) manufacturers — are trading even higher at historical PERs of 60-80 times.
Yet this may not tell the whole story as investors also look at the forward PERs, as past earnings do not always correlate with future earnings.
Simply put, what is cheap today may be expensive tomorrow, and what is expensive today may be cheap tomorrow.
So, what lessons should investors learn from the glove mania last year, and more importantly what are the mistakes that they should not repeat in the tech rally this year?
In the latest issue of The Edge Malaysia, we spoke to the market experts to get the answers. We also looked at various other topics including the current tech rally’s resemblance to the dotcom bubble of the 1990s, the global chip crunch that threatens automakers worldwide, and the bargain hunting on glove stocks this month.