Alpha Pro Tech Ltd (NYSE Amex:APT) Hitting On All Cylinders

Alpha Pro Tech Ltd (NYSE Amex:APT) shares have performed well since our initial highlight of the stock on August 18,2009. At the time, the stock was trading at $3.50 per share.

On October 27, 2009 the company reported 2009 third quarter financial results, exceeding analyst estimates by $0.01.

The stock pulled back hard on the day of the release, but has subsequently rebounded.

We urge interested investors to listen to the company's bullish conference call replay.  Below are some of our notes and thoughts on the call.

Alpha Pro Tech is reporting exceptionally strong growth in two of its product categories, Infection Control and Building Supply.

Its Infection Control segment, which makes protective masks, continues to benefit from the H1N1 pandemic. The run rate of its N95 H1N1 masks is at $36 million and at full capacity. Alpha Pro Tech is considering the addition of new N95 manufacturing lines, each capable of contributing $9 million in annual revenues. The Company speculated that the H1N1 pandemic could last two to five years, which bodes well for an acceleration of its sales momentum  through at least 2010. Gross margins should also see gradual improvement as its N95 mask revenues increase.

Alpha Pro Tech's Building Supply segment, which manufactures synthetic roof underlayment and housing wrap, is also experiencing strong growth. The underlayment market's transition to synthetic roof underlayment in lieu of traditional felt paper is gaining traction and should continue to fuel growth going forward. Synthetic underlayment is a safer, more cost effective alternative than competing products and currently comprises only 5% of the $500 million underlayment market.   This segment should also benefit from a significant expansion of its India and Valdosta, Georgia manufacturing facilities.

We have estimated that consolidated 2009 third quarter revenues were held back by about $500,000 due to supply chain issues in its disposable protective apparel product line, issues that have since been rectified.

Investors may place a premium on Alpha Pro Tech shares based on to the H1N1 "buzz" and the growth opportunity present in its vertically integrated Building Supply segment. A vertically integrated model enables APT to bring a higher quality products to the market quicker than its competition.

On a lighter note we are also monitoring China-Biotics Inc. (CHBT), Hong Kong Highpower Tech (HPJ), Tm Entertainment & Media (TMI), Telestone Technologies (TSTC), and Tongxin Intl Ltd (TXIC), U.S. listed Chinese stocks that have corrected hard over the past two weeks.

Disclosure: Long APT