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Hot Sector – Should you seek refuge in rubber glove stocks?

Trading room – Fri 30 Nov 2018

 

Many analysts are pointing to the high valuations of rubber glove stocks as a deterrent to investing in glove makers.

Yet, it was reported that those who balked at buying glove stocks at the end of last year, because they believed valuations were too stretched, could be kicking themselves given that the share prices of the four largest glove manufacturers have outperformed the market by a long shot.

And rubber glove companies have continued to outperform, be it in earnings or share price performance. The interest in rubber glove stocks could also be due to their resilient business, which is a safe harbor in the face of many problems encountered in other sectors on Bursa Malaysia.

 

Performance of rubber glove stocks

Although it is arguably too early to state with any certainty if the companies can maintain their strong share price and earnings momentum, a local online media reported that the industry expects further market share gains amid capacity expansion, supported by robust global demand.

According to a forecast by the Malaysian Rubber Glove Manufacturers Association (MARGMA), local glove companies will supply 63%, or 168.8 billion units, of global consumption by the end of the year.

The association also expects the sector to see a double-digit growth rate of about 15% over the next few years.

 

An analyst was quoted recently as saying that “If you look at their earnings, most of the glove counters have recorded double-digit revenue growth over the last few years. With demand still expected to be strong, their earnings growth could be sustained. Nonetheless, while their fundamentals are strong, they are also not cheap.”

 

Hence, the question is how long should you stay invested or traded in the sector?

Is it a good time to add more exposure to the sector before the stocks run further or is it time to be more cautious and take your profit?

A look at the rubber glove stocks based on our proprietary algorithm shows clearly which stock you should hold and trade and which one you should avoid at this juncture. Act as soon as their critical level is breached in the direction of the breach.

 

Trading plan for rubber glove stocks

Note: Certain info presented in the tables above has been redacted to comply with the agreement with elite members of the mPower Algorithm program and mPower Trading program and certain institutional clients. The above analysis reflects our personal view only and is subject to terms of use. Please refer to the full report inside for the complete info.

 

Track the rubber glove stocks and their immediate actionable trading plan at our mPower Algorithm and mPower Trading programs and seized the opportunity early and avoid buying at a momentum or cycle top when the dominant trend ends.