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Why Pacific Ethanol Stock Popped 12.5% Today

By Rich Smith – Updated Oct 5, 2020 at 5:26PM

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Coronavirus fears could drive demand for more disinfectant.

What happened

Shares of corn-based alcohol producer Pacific Ethanol (ALTO 0.43%) closed 10% higher at the end of Monday trading. There wasn't any specific news driving the stock higher...except for the news that you cannot possibly have missed.

Just before 1 a.m. Friday, President Donald Trump tweeted out the news that he and First Lady Melania Trump -- and several others within the Trump administration -- have all been infected with the novel coronavirus and come down with COVID-19 cases of unknown severity.

So what

All weekend long, investors watched for additional details of the President's illness, and while there's been no lack of details, some of them appear to be conflicting. All that's known for certain is that the President has been treated with a "kitchen sink" load of coronavirus remedies -- everything from antibody "cocktails" to antivirals and steroids.  

One other thing that seems certain: Discovering that arguably the best-protected people on the planet haven't been able to escape infection with SARS-CoV-19, people are going to be more nervous now, and they're going to be even more conscientious about wearing masks, washing hands, disinfecting surfaces, and sanitizing hands going forward.

Stock up arrow rising over 2020.

Image source: Getty Images.

Now what

This would be good news for Pacific Ethanol. Since the arrival of Covid, the company has shifted its business model away from producing low-margin ethanol as a gasoline additive and toward producing high-margin ethanol for use in disinfectants and hand sanitizers.

Already this switch up has delivered Pacific Ethanol's first profitable quarter in the past four years and generated a tidal wave of free cash flow. Investors on Monday seem to be betting that business will continue booming for Pacific Ethanol.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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