Face Mask, Hazmat Gear Run Drives Wild Gains and Short Sellers

(Bloomberg) -- Investors looking for returns despite a market rout driven by the coronavirus outbreak have jumped wholeheartedly into small-cap companies that make protective gear to stop the spread of infectious diseases, but so have the short-sellers.

By Feb. 28, Allied Healthcare Products Inc., the maker of mass casualty ventilators and other medical products, had surged more than 1,800% this year as Covid-19 spread outside of China. Fears started stirring in the stock market in late January, and amped up substantially in the second half on February. Alpha Pro Tech Ltd. which sells face masks among other products, jumped more than 500% while Lakeland Industries Inc. almost doubled. All three stocks lost ground on Monday even as volatility continued to trigger trading halts in Alpha Pro Tech and Allied Healthcare.

None of the three small-cap companies immediately responded to requests for comment.

Neither Alpha Pro Tech nor Allied Healthcare has coverage from analysts tracked by Bloomberg, while Lakeland has one analyst who rates the stock a buy with a price target of $16, a few dollars below where the hazmat suitmaker is trading today.

Short-sellers didn't miss the surge either and bearish bets started accruing in late January. Short interest as a percentage of free float, which had been less than 1% in all three gear makers before Jan. 23, now ranges from 12% to 32% for the trio, according to data from S3 Partners.

Alpha Pro Tech said last week it was ramping up production of a special face mask to protect against the virus, but it's not the only company racing to meet soaring demand. S&P 500 heavyweight, DuPont de Nemours Inc.. told CNBC last month it was working overtime to meet the call for more gear. On Friday morning, the U.S. surgeon general issued a warning for citizens to stop buying face masks and stick to frequent hand washing as a means to stop the spread of the respiratory disease to prevent a shortage for health-care workers and sick patients.

To contact the reporter on this story: Cristin Flanagan in New York at cflanagan1@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Lisa Wolfson, Richard Richtmyer

©2020 Bloomberg L.P.