Thursday, December 03, 2009

My Views On Rubber Gloves




Many people have been asking my views on the rubber glove makers. They have all been on a torrid run for most of 2009. I did not spot the sector early enough, hence I did not highlight that sector as an entry position for the past few months. You cannot be spotting everything. Just because you did not get that sector does not mean one should deride that sector - kudos to those who went in early, ride the trend as best you can.

You look at every single report, the potential upside catalysts are always good results and improving earnings driven by ongoing capacity expansion. Not that I am bitching here, one should also learn to scan for time to take some chips off the table - name me one research report that is a "sell" or a "downgrade" on rubber glove makers ... none, there have been none for the past 11 months. So basically, everybody have been asking everybody to buy, everybody have been basically long or longer ... so who have been selling?

The sector is having a strong run, no doubt. But guess who is selling? Well, the people who anticipated this kind of run more than 12 months ago, and company owners and insiders as they have the most shares to sell. I am not suggesting that owners are selling the shares as a scammish thing, its just the natural thing to do - yes, it is acceptable to like your own stock and tout it to the papers and still sell some shares.

Why I think its time to take some chips off the table: the storyline is getting repetitive (capacity, earnings growth, product mix, and a genuine concern on potentially global pandemic diseases). There is like no "bad factor" at all, how can things be so rosy for so long? Well, they can't. I do think the catalysts are there, but I also think that the catalysts are getting very old.

Its like so many good stuff and optimism have been priced in, there is little room for bad news. When investors begin to shout "where got bad news" ... you know it has gone too far.

Just be careful out there. Oh, not all glove makers are the same, I prefer Hartalega among the whole bunch. Plus be careful on the ones with a much bigger free float, go do your own research.



p/s photos: Nancy Wu Ding Yan

2 comments:

Kingsmen said...

there is only two serious players in this industry...top glove and harta...the rest are alsoruns....kossan in embroiled in infighting...stanley just out to kill shareholders...ircb? too small for s.mokthar to bother

Salvatore_Dali said...

good points