The Transparent RRSP: Breakout, Breakdown

The week of December 18
  • I bought 35 shares of TPK.V at $6.55 on December 18. It cost $229.25 plus $0.35 in commissions. There is $11.86 in cash left in the RRSP account.
TPK

TPK.V price chart on freestockcharts.com

Last Monday, I put in a limit order to buy 35 shares of TPK.V at $6.55 and it was filled at that price. I was so glad as it went straight up right after…until it did a reversal on Wednesday. It’s now back to my entry price.

I did the above screenshot the day I bought the shares. I commented on the monthly chart that this stock could trade sideways even longer. Sometimes with these bottoming patterns, you’ll find that there are a few false takeoffs before it really takes off. My hope is that it continues to trade sideways for longer, offering even more entry opportunities to add to the position. That way, if and when it does take off, the upward move will have a better chance of being sustained even longer.

The market didn’t budge much this week and I don’t expect it will next week. Trade volume between Christmas and the new year is usually quite low. There might be a bit of selling, but I don’t plan on making any trade decisions within the next week.


Already people are posting with glee that they’re on vacation. I wish you all happy and safe holidays! I hope to catch up again next week when I’ll be in Vancouver. 

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Your Special 4/20 Newsletter of 2017: Medicinal Stocks

“What weed stock should I buy?”

If there is one question I am asked the most, it’s the cannabis question. I’m asked about this more than whether to buy Facebook, Apple, or Lululemon. I don’t know anything about cannabis strains, but I can speak a bit more about cannabis stocks.


2016 to 2017

Last year I posted a newsletter on this celebrated day. I listed a few stocks to check out:

  • Canopy Growth Corporation | Ticker symbol CGC.V | $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

This is where they’re at now:

  • Canopy Growth Corp.| Ticker symbol now WEED.TO on the TSX | $10.24
  • Aphria Inc. | APH.TO now on the TSX | $7
  • OrganiGram | $2.87
  • Mettrum Health | It halted trading at $7.05 because it’s merging with Canopy Growth Corporation
  • Emerald Health Botanicals| $ 1.54

WOW.

I wanted to buy all of them out of pure excitement, but at the time, it was a decision between me and JP. We decided on Aphria, mainly because of its price and proven earnings.


Cannabis presents a new industry for the public, and it’s still in its early stages as it’s working its way through various long and rigorous legalization processes. You can’t expect this journey to be straight and easy, but it’s going to happen whether you agree with legalization or not. (Interesting personal observation: Among the people who ask me what weed stocks to buy, half of them are very conservative and would never smoke it. The other half smoke it and still have shown no indication of buying any of these stocks.)

I remember the time when Colorado and the few other states were legalizing. It was impossible to tell which weed stocks to buy on the US exchanges. They each had the patterns of the new publicly traded company in a speculative industry: cheap with wild swings in volume and price moves. I had to wonder if a company was going places or was just another pump and dump.

I watched a lot of media coverage on Colorado. There was definitely a saturation of industry players – in other words, too many suppliers. Some went just as quickly as they arrived. The stronger, more resilient, established, and adaptive ones survived and endured. Others joined forces and resources to become bigger companies. It will be interesting to see how the industry plays out in Canada.

I’d purchased a couple of other weed stocks since, both of which trade on the TSX Venture Exchange. I bought shares of:

  • Maple Leaf Green World Inc. | MGW.V | 0.62 and
  • The Hydropothecary Corporation | THCX.V |$2.28

I did a quick search and found other stocks with good trading volume:

  • ICC International Cannabis Corp. | ICC.V | $1.29
  • Aurora Cannabis Inc. | ACB.V | $2.84
  • CanniMed Therapeutics Inc. | CMED.TO | $11.61

Oh! And I love that Horizons has created a new ETF: Horizons Medicinal Marijuana Life Sciences ETF (ticker symbol HMMJ.TO, $10.80). It’s got a wonderful mix of medicinal cannabis stocks from Canada, the US, and the UK, including one of my portfolio darlings, Aphria. It also owns some of the stocks mentioned in this newsletter so far. At some point, this ETF will start paying distributions (none yet). If this is a long-term investment for you, then you might want to hold this in your RRSP to avoid withholding taxes.

There are a few things to note about Canadian cannabis stocks. They’re inexpensive and they all overreact to any cannabis information that comes out of Trudeau’s mouth. They settle down after the market reaction to any news and shape up again for more investors to get on board before the prices go up for another run. It’s generally been run after run at higher and higher prices.

Most of these stocks trade very similarly to each other, with only their prices and trading ranges that might differ. If your stock isn’t moving like the others, you might have to wait longer to better see whether or not it’s a dud before getting rid of it. It also might just be a company that needs a lot more time before it proves itself to the market.

If you’re considering buying shares of cannabis stock, you’d have to look deeper into the company’s fundamentals. Remember, because they’re new and in their early phases of development, they all promise growth. I would pay most attention to company earnings and pick the one generating profits already.


The Cannabis Industry vs. the Market

Without trying to sound the alarm, I will strongly suggest that I feel that the market is going to have a major correction soon. The market had a huge nine-year run. We’re now facing rising inflation rates, a new US president, and heavier selling volume in the market as of late. Major stocks that had a good run outshining the market, are showing signs that their investors are now being cautious, even uncertain.

As proactive investors start to unload their positions, they’ll be executing their defensive plays (getting into utilities and consumer staples), as well as looking for what is trading on its own page and less affected by market moves. I think that cannabis stocks, given their industry newness and lower prices, will provide that opportunity for investors.

You might feel conflicted about cannabis and if you do, then you should probably feel the same way about alcohol. As we all know, booze was once outlawed and look at it now. The same will happen to weed. They say if you can’t beat them, then join them. What’s nice about a cannabis stock is that you don’t have to smoke it to own it.

 

 

 

 

Column Published in Investor’s Digest

 

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August 26th Issue

 

If you’re interested in investing in exchange-traded funds, you can read about the various ETF strategies I recommend in this issue of Investor’s Digest of Canada! 


Other columns published since…

October 7, 2016 Issue: Getting Heavy Into Metal

November 25, 2016 Issue: The Investor’s Investor and Stock Picking

February 10, 2017 Issue: Smaller Time Frames, Bigger Profits