Canopy Growth’s “Disappointing” Q4, Fiscal 2017 Earnings

Disappointment is often relative to what the expectations are and sometimes expectations are too optimistic for no great reason. Analysts were hoping for a few million dollars more in revenue and probably lower losses. Apparently a 191% increase in yearly revenue wasn’t impressive enough.

Canopy Growth is in extreme growth phase which means there’s going to be a lot of money spent. If you’re in the Canadian marijuana industry the time to make moves is now while everyone else is way behind you. While the medical marijuana industry is significant it’s all about the recreational side of the industry. Once it goes legal it’s going to be going from zero to sixty. Any earnings made now are not a great indication of success for the future.

Next quarter should be much more impressive given that they have their oil extraction machine in operation now, new line of gel capsules and the Mettrum facilities in order. This Bruce Linton guy appears to be the visionary of the industry. I like what he’s doing.

Post-Nov 16th Blues

Nov 16th, 2016 might have been just another day for you unless if you had money in cannabis stocks. All stocks went parabolic only to crash in the last hour of the trading day. I was up around $200,000 at the peak when I was sleeping. When I awoke I was up around $170,000. By the end of the day I was up only $130,000. “Boo hoo,” right? Still, money is money regardless of how much you start with. Sure, negative $70,000 would have been much worse but it still hurts.

Since then I’ve been thinking about that roller coaster of a day probably every day. I suppose I should have sold everything but the mindset that had you stay in the game for that long is also the mindset prevents you from selling.

My game plan was to hold these stocks long-term. The flaw in that strategy is that these stocks are short-term stocks for many. It doesn’t matter what I believe it’s what everyone else is doing that matters and everyone else is looking for a quick profit.

The hold strategy did me well in the beginning. While I got caught holding much of the bag, there were many who sold way too early. If you sold Canopy Growth anywhere from $3 to $6 you would have missed out big time and not have had a chance to buy back at a lower price.

Some thoughts since then…

Lesson #1: Be able to change gears. When Canopy hit $15 and change I should have thought that the price was way too high in this stage of the game.

If I sold, the worst case scenario would be that I would be up $170,000. How much higher could those stock prices go from there anyway? Would it not ever come back down? Hindsight is 20/20 though. If the prices did continue to go up then I would have said, “I knew it!”

I’ve learned it’s all about what happens after the fact that decides your perspective. When the stocks were on their 3 month run, all I thought was “I knew I should have bought more!”

I did sell some Canopy at $12.40 and also a couple side positions. That was part of my reason for not selling more on Nov 16th. I didn’t want to give away any more shares of my beloved Canopy. Don’t get emotionally attached to a stock, I know. I’m not sure if I’m emotionally attached or if I just believe in them a lot. It’s not the same.

If I was somewhat rich already I probably wouldn’t care too much about the wild swings but I’m just a poor boy and nobody loves me. My life is sort of riding on these stocks. Sounds sad, eh? We all got to have a dream.

Marijuana Legalization: Online Sales Before Pot Shops

Rumour has it that day 1 of legalization in Canada will not see line-ups around the corner with people waiting to get into stores. The great consolation rumour is that there will be legal recreational marijuana available online.

It can’t be that big of a disappointment, can it? If online shopping was so horrible, Amazon’s stock price would not be hovering at the $1000 mark and Blockbuster video would still be around.

I’m very curious if this could play out to the advantage of certain LPs. If you shopped for weed in a retail store it would be kind of difficult to differentiate the different brands. If at home on your computer shopping for bud you can take your time and read about each LP if you so wish without feeling rushed by some dude behind you eagerly waiting to buy his first gram of legal marijuana.

This also plays into the first mover advantage theory. The first LPs to have presence in a legal market will establish branding advantage. If there’s going to be at least 10 LPs you can buy weed from online, subsequent LPs to enter the market after are going to have a difficult time getting customers.

Think about what people will see when they shop online.

Canopy Growth: Largest licensed producer in Canada. Facilities in at least 3 different provinces. Canopy Rivers who offer additional marijuana from other licensed producers. Tweed, Mettrum and Bedrocan products. Tweed Main Street online store.

Every other LP will pale in comparison to Tweed’s description. I’m also sure they will find some way to incorporate Snoop Dogg’s affiliation. If you’re a first time buyer and you have all these LPs to choose from you’re likely going to just try Canopy’s product. People gravitate to the safest bet. By the time retail outlets are running, people will already be accustomed to the brands they like.

It’s hard to say if online sales will be done through a provincial distribution channel or through an LPs website. If through an LPs website it could mean greater profits.

Popular Sites for Marijuana Stocks Information

The internet will lead you to certain websites more often than others. With the many websites competing with each other for your views I recommend none but sometimes you don’t have much of a choice.

Stockhouse Bullboards

The bullshit boards are full of people operating at the same intellectual capacity as 21-year-old YouTube commenters. It’s not that there isn’t any good input on there but you’ll have to tolerate mounds of posts from fear mongers, spammers, childish arguments and members who are very new to investing/gambling.

Motley Fool

By far they shoot out the most marijuana investing articles stating how a good investment they are while bashing the sector the next day. You can say they are giving different viewpoints but mostly what they are doing is trying to get clicks. If you’re not very sure of yourself their articles will confuse you even more.

Seeking Alpha

Their articles on the marijuana sector are similar to Motley Fool’s except you get to comment to tell them how wrong they are. I don’t think you have to be any type of pro to have your article published by them. I’ve seen some written by college students.

Chris Parry

His writing can be entertaining but I sense a bias given that he’s pumped certain companies who were also sponsors of the site he was writing for. The suspicious part is that those companies were loser penny stocks. Naturally Splendid(NSP)? C’mon. And Nutritional High(EAT)? Anyone pumping those stocks has to be benefiting from it in some way.

420 Investor

This is the best out there by far but it costs $48 USD a month. For full disclosure I’ve been a member for about half a year. While Alan Brochstein may not call it right all the time he works very hard for the members and is very honest. The information he provides is often not available on any other sites. Unlike Chris Parry, you don’t get any sense that he’s working for any company. They way I see it, to justify the $48 a month you need Alan Brochstein to help you make or save that much which is very doable. 420 Investor offers breaking news, daily videos, monthly newsletters and a weekly online chat. The other positive aspect of 420 Investor is that you get to be part of a community. http://www.newcannabisventures.com is Alan’s other website which is free and also very informative. It’s a junior version of 420 Investor.

MedReleaf: Two Days After the IPO

“Damn it, I knew I should have bought it.” At the $7 range it was said to be a “screaming buy” by marijuana stocks researcher, Alan Brochstein. Unfortunately for some, the recent doom and gloom of the industry may have stopped them from picking this one up. In terms of revenue MedReleaf(LEAF) is an equal rival to Canopy Growth.

MedReleaf is now hovering in the low $9 range meaning us chumps missed out on about a 20% gain. Been there done that but it never feels good. The way I see it is that at $7.50 even if it went lower the price would eventually get back to $7.50. In the weed space, MedReleaf is a solid company being one of the early LPs providing medical marijuana since 2014. The experience, quality of products and attractive valuation should have made it almost a no-brainer. But when the rest of the space are at their recent depressing lows it’s hard to pull the trigger. In this type of environment many can’t help but think, “maybe it will go lower.”

 

Chuck Rifici and Tweed Feud

Recent tweets from Tweed co-founder Chuck Rifici have given the strong impression that he harbours some angst towards Tweed or at least towards some of the people who run it. It remains publicly unknown why he got voted out of the Tweed island but it is likely the source of his negative feelings towards them. Whatever the reason is it must have been something colossal to want to kick out one of the founding members. One would think that you would rather have Rifici on the Tweed team than against.

Now Chuck appears to want revenge with the launch of his new company, Cannabis Wheaton. To form a larger LP than Tweed perhaps seemed daunting so his plan is to gather a bunch of smaller fries. Whether Cannabis Wheaton is a well-thought out idea or just a desperate attempt to make another name for himself in the weed game remains to be seen. He may not be necessarily driven by revenge but you have to think that it’s a big part of his fuel mixture.

Rifici tweeted that he has sold off all of his Tweed shares and referred to it as, “good riddance.” I wouldn’t doubt that his sell off of millions of shares contributed to a recent drop in Tweed’s share price. Any comment he has recently expressed about Tweed have appeared to be jabs. Just days ago he announced the “poaching” of Tweed’s master grower.

If I were Chuck Rifici I would be swimming in the millions of dollars he has gained from shares of Tweed, Aurora Cannabis and Supreme Pharmaceuticals instead of tears and rage but it’s probably not about the money anymore.

 

 

Recent Lows in Canadian LP Share Prices

An unwritten agreement that you made with yourself when you signed up to be in this industry was that volatility would punch you in the gut at times. I’m not too bothered with Canopy Growth being in the $8 range but any lower would bug me. It shouldn’t bug me given that I’d still be up but giving up all those gains is a stinger.

To put it back in perspective when I started this journey of investing in marijuana stocks I told myself that I was in it for the long run. I didn’t even expect Canopy Growth to be at $8 at this time. If these stocks just arrived to where they are now I would be insanely happy. It just goes to show that emotions are a victim of the current trajectory and not the destination. Damn you feelings.

The bright side is that legislation has been announced furthering the possibility of legalization. The bad side is that the number of publicly traded LPs has increased which dilutes the industry. I think I’m more worried about potential regret than I am of this sector not working out.