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WaeV

Finance, Investing, and Speculation Thread

19 posts in this topic
Canada's leader Trudeau has pledged to legalize cannabis in spring 2017, and stocks are taking off in anticipation. USA ballot results are also good news for the industry... one in five US citizens now lives in a state with legal cannabis.
 
States with recreational cannabis:
  • Colorado
  • Washington
  • Alaska
  • Oregon
  • D.C.
  • California (new!)
  • Nevada (new!)
  • Massachusetts (new!)
  • Maine (new!)

States with medical cannabis:

  • HI, MT, VT, RI, NM, MI, AZ, NJ, DE, CT, IL, NH, MD, MN, NY, OH, PA
  • Arkansas (new!)
  • North Dakota (new!)
  • Florida (new!)

However, despite the hype cannabis is still federally illegal in the USA and it's unclear whether Trump/Pence will continue Obama's policy of "let the states decide". If Giuliani or Christie becomes Attorney General, they might order the DEA to enforce federal law. So the US stocks are more risky.

I'm far more confident in the Canadian stocks. Since Canadian legalization is impending, they will be able to grow faster and stronger than US-based companies. Many of these companies are poised for international expansion:


Canopy - CGC (TWMJF in USA)
Market size leader, most poised for expansion into the USA. Has a strong presence in the recreational market (as opposed to the medical market). Tie-in with the Snoop Dogg brand lends celebrity credence. Considered the bellwether of the cannabis industry in Canada. They have already acquired some other cannabis companies, most notably Tweed.

Aphria - APH (APHQF in USA)
Most profitable limited partnership, best margins, great long term play. Canada's lowest-cost producer at the moment. Management is taking a very structured approach. Will be releasing their recreational strategy and branding in early 2017. They also have plans to export their product to Australia. Price might be a little high. Definitely more of a long-term than short-term play.

Aurora - ACB (ACBFF in USA)
Short-term prospects uncertain because they're going to issue more stock and dilute the price soon. In theory they have until March 28, 2018 to do the dilution, but it will probably happen sooner. Bullish after the dilution happens. Has a lot of potential... higher risk for higher reward.

Mettrum - MT (MQTRF in USA)
Number #2 in Canada for revenue and medical patients (they operate medical dispensaries), but they have a surprisingly low market cap. Arguably the management does not have a solid business plan, but many are bullish. There are many negative reviews for the quality of their product, which could be a downside.

Organigram - OGI (OGRMF in USA)
First organic cannabis operation, will be a niche player in the recreational market. Possible target for an acquisition?
 
One popular American cannabis company included for comparison:
Terratech - TRTC
Operates a non-profit dispensary in California, also 2 of 4 dispensaries in Nevada. The stock is hyped way up following the election results, arguably 10x overvalued. Also, the management has a shady past "littered with SEC violations". Steer clear of this one.
 
There are plenty of other penny stocks, but they are too risky for my appetite. It's also common to see "pump and dump" companies which raise money on hype but don't deliver good profits. I plan on initiating positions in all the reputable ones: CGC, APH, ACB, MT, and OGI. Going forward I will watch the charts for good deals, and pick up additional stock as it goes on sale.
 
Comparison of market capitalization (share price * number of shares) for the nine largest Canadian cannabis companies:
3hci2h.png

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Trump has been vocal about his support of States Rights. MPP gives him a grade C+, but he's been relatively consistent on the legalization of medical marijuana and legalization in general since the 1990s.  

 

I also wouldn't say Obama or his Administration has had a solid stance of "States Rights" in terms of marijuana. In 2013 Obama signed the Federal Farm Bill which contained a clause that authorized the growth and use of industrial hemp. 

 

Here in Kentucky the state has been experimenting with a hemp pilot program after the signing of the bill. The state ordered 250lb of hemp seeds from Italy to experiment with as a possible cash crop...it was seized by the DEA before passing through Customs. The DEA stated while it recognized the Farm Bill allowed for hemp to be grown, it was still enforcing existing procedures for importing items covered by the Controlled Substances Act. The DEA then went on a run-a-round making undue demands of the state, lying about the law, and generally antagonizing the state.

Rather than President Obama speaking to AG Eric Holder to have the DEA release the hemp into the care of the state..the State had to file an injunction with a Federal court, then had to apply for a "control substance permit". 

 

It's an interesting occurrence, considering during this time frame, Colorado had legalized marijuana and was receiving absolutely ZERO Fed interference from the DEA or DOJ, but Kentucky was being stonewalled. One could almost surmise some kind of backroom dealing or partisan politics was being played out. The DEA was being lead at the time by Michele Leonhart who is HIGHLY unpopular with marijuana legalization and reform advocates, as well as having been the subject to a Congressional investigation surrounding rumors of sex parties and prostitution under her watch as DEA Administrator, she resigned once Congress blew the lid off the scandal. 

Edited by Weps
WaeV likes this

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Interesting, I didn't know about that Kentucky incident. Perhaps it was handled differently due to the international trade? So far, states have been free to do whatever they like within their own borders, but even cross-state trade is verboten, so I could see international trade being cracked down on. Although I'd believe backroom dealing / partisan politics too.

 

All's well in the Canadian weed market, though... Canopy released their financials this morning and the entire sector is up:

  • Canopy +22%
  • Aurora +2%
  • Aphria +12%
  • Mettrum +13%
  • Organigram +27%

Organigram is up so much, they actually published an announcement to remind people that not much has changed, haha http://www.marketwired.com/press-release/organigram-holdings-inc-announces-no-material-change-tsx-venture-ogi-2175419.htm

 

My favorites right now are Canopy, Aphria, and Organigram. Aurora's gains are going to be muted until they get that stock dilution out of the way in late December.

 

Some contrarians are pointing out that trading at 40x earnings is not sustainable... but I'd argue we're not paying for present earnings but future earnings. Canopy's quarterly revenue is steadily increasing, as is their subscriber/patient count.

 

20161114_C1051_PHOTO_EN_817036.jpg

 

Tomorrow Aphria and Mettrum are announcing their financials... hopefully it looks good!

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1 hour ago, WaeV said:

Interesting, I didn't know about that Kentucky incident. Perhaps it was handled differently due to the international trade? So far, states have been free to do whatever they like within their own borders, but even cross-state trade is verboten, so I could see international trade being cracked down on. Although I'd believe backroom dealing / partisan politics too.

 

Well, even if it was international trade regulation, that doesn't fall under the authority of the DEA or DoJ, that would be the authority of the State Dept. and Dept. of Commerce, but even then their powers are limited. 

 

Now, the Commerce Clause gives Congress the ability to regulate foreign and cross-state trade. Trade between the states also isn't verboten by law, but by how this Administration has chosen to enforce laws to exercise power it Constitutionally doesn't have.

 

As of December 2015, fifteen states have pilot programs for industrial hemp, however Kentucky is the only state to receive any interference from the Federal Government over it's program, but other states do have European strains of seeds. 

 

 

 

 

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I looked into that Kentucky interference thing and it sounds like total bs. The shipment of seeds from Italy was intercepted for no good reason, since it was merely industrial hemp and not even the psychoactive kind. The DEA was just like "idk, it's hard to tell the two apart". If you see this event as malicious (rather than incompetent), it starts to look like the DEA cares less about psychoactivity, and more about suppressing competition for wood pulp and cotton.

 

Regardless, USA is not the place to be investing in cannabis right now. Especially with Jeff Sessions headed for the office of Attorney General. Canada remains the place to be! My top picks are still Canopy, Aurora, and Aphria. Honorary mention to Organigram and Supreme. Mettrum is actually due to be bought out by Canopy; if you're confident the deal will go through, Mettrum is trading at a slight discount to the equivalent Canopy shares.

 

In other news, WOW Nvidia does not stop going up!

 

YwwZxE.png

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I read that it's in large part because of Europe's new privacy laws. But yeah, that's a lot of damage.

 

As an aside, I wish the US would enact that privacy law.


Kavawuvi: one of these days these glutes are gonna squawk all over you

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On 7/26/2018 at 7:19 PM, WaeV said:

Holy cow, did you guys see the move in Facebook last night / today? It was down -24% last night! Recovered a bit today, now they're only -18% lol.

 

My gut told me to dump it a month ago. I wasn't feeling very good with the $275 outlook after I did. Looks like I won that round!

Tucker933 likes this

If it flies, floats, or fucks, rent it.

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