For early investors of Cannabis Stock, the returns are more than made. With the legalisation around the corner and big corporate collaborations like Coca-Cola making early moves of acquisitions, It’s fair game to ask if it’s now a good time to make the move and buy some Cannabis Stocks. It’s my mission to find out if weed stocks have a place in our portfolio’s or if they’re better off for the punters.
The most recent round of cannabis Stocks hype was with Canadian cannabis grower Tilray, when their stock went from an IPO price of $38 to over $250 in an matter of weeks. They were the talk of the town, almost destined to plummet as much like myself put out their warnings.
Recently, Jim Cramer said in an Interview that Canadian pot company – Canopy Growth WEED (TSE) – was the only investible cannabis stock on the market right now, and I kind of have to agree with him.
Comparing some of the market leading growers in Canada, it seems like the Canopy is actually the most investible of the bunch as things sit right now. Bruce Linton, CEO of Canopy Growth, said in a interview with CNBC “Don’t lump us into the investor frenzy around cannabis Stock Tilray”, as he tried to explain his point of difference between the two rivals.
Industry leading growers Canopy is trading at highs of $64 currently with a 531% growth over the past 52 weeks, however have some strong numbers to back up the premium valuation.
Furthermore, the future of the growth of Cannabis Stocks is still in the beginning. This is a multi billion dollar untapped industry we are dealing with here, so markets are now pricing in the current state of the market. Canopy Growth is Canada’s largest medical marijuana producer who sports an annual revenue of 75 million a year and have around 650 million in cash reserves.
Canopy Growth has a net income in the negatives, which is a red flag to myself when looking for a strong buy on a cannabis Stock, however looking forward it’s not hard to forecast this turning positive with legalisation and actually start selling legal cannabis to their customer base. Economics 101.
So should you invest in pot stocks?
At the current valuation of $64 & highs of $70 I suggest to stay on the sidelines until a pullback in the market presents itself. A month ago the stock was trading in the 30’s and now it’s more than doubled, you always need to wait for the pullback if you’re a smart investor. For early investors of the $WEED, the returns are more than made and they should be looking to take profits and offset their risk. The biggest sin as an investor is to give back profits to the market and make a loss.
If we see a pullback from these all time high prices I definitely see a short-term trade opportunity to be made around the uncertainty of legalisation, but you’ve got to decide if you’re a short-term investor, or if you’re in this for the long-haul. I think the best play will be around the build up between now and October 17. It’s up to you if you wan’t to pull the trigger.
Buy the rumor sell the news
My advice is buy on dip’s and follow the classic investing anarchy. Buy the rumors and sell on the news. There will be a lot of investors freaking out and selling around this initial period and Cannabis Stocks might suffer at the end of 2018.
The industry is just starting to heat up and has only been recently formed with lots of uncertainty and a higher than average risk associated when investing. If I was to invest in any company right now it would be a leading production company like Canopy and Aurora which are now valued in the multi billions. These are the ones to go for. These guys haven’t even started to mass-produce, market and sell for what will become their biggest customer base: recreational pot consumers. This is MASSIVE. As the industry goes through massive change we will see huge change and see these concept companies become real business’s.
To hedge your risk, It could be better to stick with the leaders and Canopy in my opinion are the current leaders in the sector and they should be able to pull off what they say they are going to do. And this means a lot, but at the right price.
But, before you make a move I need to explain to you why the USA growers have a huge advantage, and it could be a massive game changer. What will make or break any company is the marketing these growers put out. Do NOT get sucked into the claims these growers make saying they – “have the best weed in the market” or have “the best strains”. All dealers in the history of selling have said this. It’s classic marketing.
Most consumers aren’t going to care about the best strain or weed. What will make the best weed producing company, will be one that can take charge and create the best brand and the best name for themselves. This is where American companies have the advantage.
For those who haven’t done their research, The Canadian government’s proposed packaging and labelling directives are very strict. Dried product from all producers will have to be sold in uniform black or white bags, with one of six Health Canada warnings on them. Secondly to make branding even harder, producers will only be able to display their brand logos on a tiny corner of the package.
This is why the USA growers have the advantage right now as no such regulations exist in states like California and Colorado. These guys will win in the battle of the brands. These pot companies have been allowed to be as creative as possible in the marketing of cannabis.
Final Words, Which Cannabis Stock Is The BEST Buy in 2018?
The top cannabis stock in the Canadian market are reliable and safe to invest in right now. But I think over time, for the reasons mentioned above, the companies that will stand out will be those that have brand association and a specific product.