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Ebola: An emerging global health crisis of the first order. And, of course, a money-making opportunity.

Perhaps your first thoughts about the potentially devastating disease migrating from Africa to the United States didn't include "What Ebola stocks can I buy?" Well, good for you, at least from a moral standpoint. What's bad for you is that plenty of people already have been snapping up shares of even the most obscure companies on the premise of a possible Ebola epidemic, creating crazy valuations that now make Ebola investing more of a money-losing proposition.

For a window into the action, I suggest a look at Markham, Ont.'s own Alpha Pro Tech Ltd., as well as a similar New York-based company, Lakeland Industries Inc. The two make the kind of protective hazardous-material clothing that's being worn by the health-care and cleanup workers on Ebola's front lines.

By the end of Monday's trading, the two companies' shares were up roughly 150 per cent – from the preceding Thursday.

Tuesday, they each fell more than 25 per cent. And Wednesday, on the news that a second U.S. health-care worker tested positive for Ebola, the shares zoomed back up to recapture at least part of that loss.

Tuesday's losses might have been seen as investors coming to their senses, albeit briefly. Over the past 12 months, Alpha Pro Tech posted $2.8-million (U.S.) in net income on $45.4-million in sales. Its close Monday gave it a trailing price-to-earnings ratio of more than 71. Lakeland (which was in default on its bank loans in 2013) posted a $3.8-million loss on $93.1-million in sales; Monday's market capitalization would have produced a similar nosebleed P/E if it could have simply produced Alpha Pro Tech's profits.

Certainly, Ebola could be a significant global problem. Even as the two companies' shares were falling Tuesday, the World Health Organization said as many as 10,000 new cases a week globally could be reported by December (in contrast to just more than 9,000 cases, total, right now.)

The issue for Alpha Pro Tech and Lakeland, however, is the other names lined up to join in the fight with their own protective-clothing lines: E.I. du Pont de Nemours and Co. (which I own), Kimberly-Clark Corp. and Honeywell International Inc. Each of those companies' annual profits are 20 to 40 times Alpha Pro Tech's and Lakeland's yearly sales. The big guys have the size and scope to meet demand in a fast-moving epidemic. The smaller ones, not so much.

It would be one thing if the excitement over Alpha Pro Tech and Lakeland were an isolated example. But as investor Nigam Arora points out in an article on MarketWatch, investors had already piled into – and started exiting – most of the small biotechs that have possible Ebola drugs in the pipeline.

Here's some sample trading action: Burnaby-based Tekmira Pharmaceuticals Corp. started the year in single digits, pushed $35 (Canadian) in March, fell below $10 in July and zoomed close to its high again Oct. 3. It's down more than 20 per cent since then. Tekmira has no profit of any kind, and therefore no earnings multiples, but it did at least book $16.7-million (U.S.) in revenue in the past 12 months, meaning it now trades for 26 times sales. It's actually not the most expensive of the Ebola pharmas.

Will investors profit from at least one of these stocks? Quite possibly. Will it end badly for most? Quite probably. Is it a bad idea to leap into a stock based on a horrible breaking news event?

Well, let's ask investors in Kansas-based Digital Ally Inc., a maker of video equipment for law enforcement, including car- and body-camera systems. (Ethan Starr, an investor in Washington, deserves credit for calling my attention to this example.) Digital Ally was a $4 stock when the Ferguson, Mo., police killed Michael Brown in early August. As citizens filled the streets, investors filled their orders and the shares went up 800 per cent in 10 days. They have since lost two-thirds of their value.

Not so long ago, I was eating lunch with some folks when some other trendy, news-based investment idea came up. "It's too late," I said. "Why?" someone asked. "Because we're sitting around talking about it," I responded. "If we're talking about it, most of the money has been made already."

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