A friend’s mother once asked me and my man what would be a good cannabis company to invest in as she wanted to buy stocks of that sort. This question caught us off guard–it was almost as if this sweet retiree was asking us where she could get good weed. She clarified that she wanted to invest in a company that was mainly in the business of medicinal cannabis. Oh medicinal! But of course. Her interest came about after Colorado and Washington legalized marijuana use. This is actually a question I get asked a lot as more people anticipate widespread legalization. I’m sure many other stock investors are asked about cannabis companies frequently, or at least from time to time (right?). For any new and exciting industry, who doesn’t want to profit from getting in early? With all the talk of legalization in Canada, the stigma of marijuana’s medicinal and recreational use will fade, or at least its reputation will be less shady. If and when this happens, you’re better off having seized such opportunities sooner than after the industry has boomed and the stocks have become more expensive.
The research we conducted for ‘Ma’ was actually difficult because many of these cannabis companies looked similar to one another. Many of them were a bunch of small businesses that came together to form a larger company; many outlined plans to dominate all corners of the cannabis market from production and retail to medicinal research and pharmaceutical use; most were quite new in the stock market; the stock prices were cheap and in similar price ranges; and they all promised expansive growth–in both the corporate and hydroponic sense. There is typically more speculation with younger companies; what’s interesting is that many of these cannabis companies are in a newer and developing industry that is slowly gaining acceptance and becoming incrementally less illegal.
As one who looks at a lot of stocks, I am always suspicious of hype and headlines. This is because I often find that by the time the news gets announced, it’s too late–the best buying opportunity has passed. Before I buy any stock, I like to look for clues first within the sector and the economy. Is the hype over? Is there an important upcoming meeting or announcement by the government that will affect this sector? Is the sector more stable and less volatile than the overall stock market? Or is the sector overheated and likely going to experience a bit of a sell-off? Will a company be announcing its quarterly earnings soon? I consider these things in addition to checking out a company’s fundamentals that point to a solid foundation, such as healthy financial data, plans for future expansion, and developments in products and services. Then I check if a company’s stock price has stabilized and I try to anticipate what might be a good price to get shares at in the near future.
There are many cannabis companies in Canada. I took a look at some companies that trade on the TSX Venture Exchange (the stock exchange for newer and smaller Canadian companies):
Canopy Growth Corporation | Ticker symbol CGC.V | Price per share at today’s open: $2.60
Aphria Incorporated | APH.V | $1.56
OrganiGram | OGI.V | $1.10
Mettrum Health | MT. V | $1.66
Emerald Health Botanicals | EMH.V | $ 0.17
I’ve got my eye on a couple of these companies. I won’t buy too many shares, I don’t want to risk much, but like Ma, I don’t want to miss out either. I’m willing to risk a bit of money to hopefully enjoy significant gains later. Before the end of the trading day today, on this celebrated date of 4/20, I will probably buy my shares of legalized cannabis.