Weed Stocks Oversold; Light UP!

Once cannabis was the only topic we’d read about in the financial press – the long wait for legalization ( first the flower then the edible) and the stocks of companies growing the stuff.  A friend of mine who’d bought the group early told me it paid for his retirement (presumably he wisely cashed in his chips at an opportune time.  l was curious and bought one stock in the middle of the run-up and sold it, making a nice pass.


I still watched, since I couldn’t avoid the press coverage, but knew it was all over when a different friend of mine – who was my best indicator for sectors to avoid – told me over lunch he’d finally caved and bought a weed stock.  The following week the bottom fell out from under the whole group.

I was recently inspired to revisit the now tainted sector recently by a news item I’d spotted while Net surfing:

Aurora Cannabis Inc.’s (NYSE: ACB) (TSX: ACB) River production facility in Bradford, Ontario, has received European Union Good Manufacturing Practice certification, the Canadian cannabis company said Monday.
In addition to the EU GMP certification, Aurora announced that German regulators gave the company the required approval to restart sales after a December 2019 suspension on specific products.

The stock of this company seemed to stop falling (even went up briefly) on the news – so I figure maybe all the sellers have sold and moved along to other names.  I’ve always found that when all the news for an industry sector has been bad for a long time (look at the Canadian lumber industry) that any good news can signal a reversal from no interest in the stocks to a gradual warming up again…and rising stock prices.

Although I can’t determine from fundamentals yet (individual companies seem prone to occasional disasters) I do believe an ETF might be the way to experiment while the stocks are a whole lot cheaper.  We need some AUM (bigger is better) and trading liquidity to be comfortable though.  So I decided on two in particular to keep an eye on.

The ETFMG Alternative Harvest ETF trades in New York, and the Horizons Marijuana Life Sciences Index ETF trades in Canada.

Cannabis ETFs

When markets go down (see my other posts) it’s the frothy stocks that get pummeled and the overlooked and under-owned stocks that outperform.  I’ve been at this for decades and have seen the movie before.  Speaking of movies, enjoy the clip below.

About Mal Spooner

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.
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