Marijuana stocks are all the rage lately although second to Bitcoin if I had to guess. Everyone I talk to has heard of Bitcoin but not Canopy Growth.
I’ve been a shareholder of Canopy Growth since the $2.75 range, and have sold almost half my shares on the way up. Some people say this was the smart thing to do but the numbers say otherwise. Every time it doubles I think to myself, there’s no way it can go much higher, and then it does. Now I just don’t know what to think anymore.
Most of the professional investors including Warren Buffett would tell me to get out completely but then again if I listened to them I wouldn’t have bought this stock in the first place.
What you will always hear is that Canopy Growth and all the other marijuana stocks are overvalued. They definitely are in conventional terms. Amazon though has been overvalued since 1997 and Netflix is always overvalued as well. $1000 of Amazon stock at its IPO is now worth over $1,000,000.
It’s easy to make a judgement on existing numbers and the short-term future but it’s much more difficult for most people to see what the longer-term future holds. Once the future becomes the present though it all makes sense.
The following is an excerpt from an article written by the CEO of Netflix 8 years ago regarding short interest in the company.
You can replace “Netflix” with “Canopy Growth” and it would seem appropriate. As of right now Canopy Growth seems to be doing all the right things and would be the horse to bet on. I believe in the company and my only doubt is that shit happens. I realize Canopy Growth is not comparable to Amazon or Netflix in terms of size and market but the situation is similar — market leader in a huge new industry.
Mark Cuban said this in a video interview. He also added that diversifying will diversify your profits away. Warren Buffett said, “diversification is protection against ignorance.”
If your priority is to see a modest return on your investment in the long term then you should diversify. If your goal is to make a large return in a relatively short amount of time then diversifying will likely not get you there.
Conventional investing advice has a way of altering your perception. People who would gasp at your 1 stock portfolio would at the same time congratulate you on investing your life savings in a new business venture — go for your dreams! Putting it all into your one business is the same as putting it all on one stock. Most people would have been better off putting their money with Jeff Bezos than whatever costly venture they got themselves into.
Diversifying is recommended for every stock portfolio while the status-quo for everything else is to put all of your eggs in one basket. Who diversifies their education? How often do you get the advice to diversify your girlfriends?
I’m not recommending that everyone have a 5 stock portfolio. Warren Buffett also said 99% of people should just invest in an index fund. Most people aren’t skilled or lucky enough though to come out victorious in the stock market without diversification.
In the summer of 2001 everyone was in the business of selling hard drugs. When I say “everyone” I mean the 2% of who society considers low-lives. At the time, I was working one day a week at my shitty retail job because that was all I could bear.
An old friend and I hooked up again because of similar circumstances. At his place one day he mentions how he was offered a job in a dial-a-dope business that would pay him $20,000 a month delivering crack to end users.
“I don’t know if you want in or not,” he said.
I did’t know if I did or not either. You might be questioning my 21-year-old morals but where I came from there was nothing wrong with anything if it meant $20,000 in your pocket every month. The way we saw it was someone was going to do it. If half the drug dealers died tomorrow it would just mean the other half would make double.
Laying in bed that night I was contemplating the pros and cons but really I was just trying to talk myself out of it. It’s just in my nature or maybe nurture to take the chickenshit route. Getting murdered by a junkie or some other dealer was a possibility but what worried me more was getting a criminal record. In my mind a criminal record meant that I would have to be doing dirt for the rest of my life or have to work a lowly job.
In my savings I had $7000, I owned my car which had insurance for the year and I also had plans of travelling in the near future. At 21 years old I had never even been on a plane before or your typical family vacation. So I decided — no drug dealing. I pictured being in jail and thinking to myself that I didn’t have to do it. Having ambition is considered a desirable trait but the funny thing is, if I had ambition I would have embraced dope dealing with open arms.
Having ample time though and being curious I went on runs with my friend. We picked up an ounce of crack that was broken up into grams and away we went. Damn phone would not stop ringing. It was too many calls for a couple of dope dealing novices. We were slow but at the end of the 8 hour shift we still brought in enough for a $500 profit. Hmmm, $500 x 30 = $15,000. Holy shit, he wasn’t kidding about being able to pocket $20,000 a month.
He offered me $100 a day to just sit with him in the car but I declined. I figured if I was going to do that then I might as well just do it myself. Most would say that they would never sell drugs but most people also never have the opportunity. As for the morality of it — no one has an issue with the liquor store clerk who sells you unlimited bottles of poison.
Many financial bloggers and professional investors have a bias against speculative investing. Speculating is not investing it’s gambling, they say.
Gambling is going to the roulette table and hoping you hit the 1 in 36 odds of winning without any reason other than hope or I have a good feeling. Speculating is making an educated decision based on the information available, your knowledge and life experience.
If you had put $1000 into Amazon stock at the IPO you would have over $1,000,000 today. Even $1000 ten years ago would now be over $20,000. You won’t get those kinds of returns in 30 years from buying the index or through blue chip dividend stocks. That’s just the reality.
Since the beginning of time the one who was able to see further into the future with better accuracy has always been valuable. Picking successful speculative stocks or even blue-chip stocks is a play on being able to predict the future better than others. Some people believed online shopping was going to be a thing and others didn’t. People will never put their credit card information online! It’s not likely you’ll have a good understanding of multiple industries but once in awhile something comes along that might be in your field of competency.
The majority of people are really good at following conventional rules and only being able to see what’s in front of their face. To them, if a stock doesn’t meet the criteria of being under 25x P/E and having several years of profit then it’s not worth looking at — if the company’s vision is not producing the numbers yet then it’s garbage. Home Depot was a speculative stock until it wasn’t.
It’s not fair to give the advice to never buy speculative stocks. Saying speculating is not investing is just semantics. It comes down to a matter of risk vs reward. You have to be careful though and know your limitations.
In late Dec of 2017 at a steakhouse he stuck his phone in our faces as soon as he was seated. “Look at this!” He could barely contain himself.
I don’t remember the exact number because all that mattered was the “$9” preceding the other 5 digits. The fat bastard was showing us his cryptocurrency wallet. I don’t like it when other people succeed greatly so my first instinct was to deny the credibility of the situation.
A few months prior he put in $20,000 into an initial coin offering and somehow the value skyrocketed almost 50-fold. This was at the time when bitcoin prices were parabolic. “You going to cash out?” I asked.
“Not until it hits $10,000,000,” he replies.
I advised that he should cash out at least $100,000 but he wasn’t interested. Hey, what do I know? If it was me I wouldn’t have even put any money into this, and if I did I surely wouldn’t have held this long. You have to be a certain type of crazy to get rich quick.
Not even a month later I hear he’s up to $2,000,000 with this “coin” which doesn’t even do anything. What do you own? A piece of code? Being at least $8,000,000 from his intended exit target he still doesn’t cash out anything. Again, what do I know? I definitely would have cashed out in late December and wouldn’t be up $2,000,000. Who am I to stop someone’s dream of yachts and butlers.
Shortly after being up $2,000,000 the value of all cryptocurrencies plummeted 75% or more. I’ve never asked but my napkin math tells me his digital wallet is now displaying a value somewhere around $250,000. A mere glimmer of what it used to be but more than enough to have someone and their hamster professionally killed.
There’s a lesson here somewhere.
- Don’t buy into foolish investments
- Cash out at least a little bit on the way up
- You can’t make 50 times your money if you sell at 25 times
- You can’t make 100 times your money if you sell at 50 times
- Sometimes you have to take people’s advice
- Sometimes you shouldn’t listen to anyone
Where I live in Vancouver, BC, real estate is ridiculously expensive. Anyone who could have got in before 2010 but didn’t is kicking themselves. If you were born in 1990 and after then there’s not much you could have done. There were many though who were 30 or 40 years old in the beginning of the millennium and did nothing.
We all know by a fairly young age that real estate will eventually go up but many don’t pull the trigger until they feel they have to(about to get married or have kids) or when they have too much money sitting around.
Evolution is slow. People like to move slowly because it’s more comfortable. They put off buying a home so that they can save more money or they tell themselves that the market might go down. If you want to be ahead of most people your age then you have to move faster than them.
When the water is calm people lounge around. When the big wave hits or the sharks are circling, people piss their pants, panic and herd in. Once prices go sky high people are now eager to jump in. It’s just human behaviour.
So are you sure you want to wait? “Expensive” is a relative term.
Sometimes I eat potato chips multiple days in a row. I’m torn between buying small bags or bigger bags. It’s a dilemma of economics or health. Small bags at the local convenience store will cost me $1.75 which doesn’t sound like much but imagine that being an everyday expenditure. In a month that would equal $52.50 and this is assuming you don’t buy anything else. You’re already eating potato chips every day, what makes you think you’re not going to be a bigger loser and buy a soda or a lottery ticket?
That $52.50 would equal over $600 a year. It doesn’t sound like much but at the same time all you’re getting is potato chips. It’s the small habits that can chip away at your money. If you’re filling up gas you don’t have to come out of the gas station with anything else but fuel for your vehicle. There’s probably a long list of daily habits or bigger weekly habits that you can cut out.