Can’t Trust CannTrust

Most people hate Mondays because it’s the start of the work week. Monday for me this week was waking up to see my CannTrust shares down 23% because they decided to grow product in rooms which were unlicensed. They did eventually receive the license for those 5 rooms but they just couldn’t wait.

When a story like this rocks your stock it’s like getting punched in the face. I was already down 7% before this scandal broke out. I don’t know why but I didn’t sell my shares even though I believed it would just keep going down and maybe even down next to zero. My mistake was not taking the time to think about it. When you’re down so much on a stock sometimes the automatic reaction is to do nothing because you feel as if the most of the damage must be done.

My book cost is $5000 so not the end of the world. Some people out there have well-in to the 5 digits and 6 digits. CannTrust was supposed to be one of the safer marijuana stocks and more well-liked by institutional investors but so was Aphria. I was lucky enough to pick up shares of Aphria the week before their scandal hit.

The sad part about this is that I was up 100% on my CannTrust shares late last year. It crashed 50% from the top but rebounded a few months later to about 80% in the green. So I was up $5000 and now I can potentially be down $5000 if it goes to zero.

I’m not expecting it to go to zero since the pesticide scandal with Mettrum and Organigram never materialized any great consequences. There’s some lessons here as usual when it comes to the stock market.

In the past year I have traded CannTrust here and there for a $2000 profit. I could break even after all is said and done. Earlier this year I held a bigger position in CannTrust but luckily I sold most of it. I had lost confidence in them already from a lack of disclosure on their part regarding the president departing and building permit issues.

  1. Don’t get too greedy. When I first bought CannTrust shares my plan was to sell at $13. When it hit $14 I didn’t do anything.
  2. When very bad news comes out the best idea is to sell your shares even if they’ve bled a fair amount.

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New Stock Addition: Suncor Energy

Ask me what Suncor does to make money and I wouldn’t be able to explain it to you in detail. To be honest I don’t think I could do so with the Canadian banks either. What I do know is that Suncor is one of the biggest Canadian companies, considered a safe investment and Berkshire Hathaway recently acquired some shares. I’m sure Warren Buffett or his team did the required due diligence so I wouldn’t have to.

After selling the rest of my Canopy Growth shares in my pension portfolio it freed up a lot of cash. My aim for this portfolio is to have it appear respectable — meaning no penny stocks or any of their relatives. Currently, there’s more money in cash than there is in stocks. Suncor is about 2.5% of the portfolio.

Suncor offers a dividend of just over 3% which is decent but I’m not too excited about the stock appreciation potential. Compared to many other stocks or even the S&P 500 index it has lagged significantly over this 10 year bull run.

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My purchase price was $43.93. Back in December I could have picked it up at $36 but I pussied out. At the market bottom on Christmas Eve I only bought $6000 worth of other stocks. Better than nothing but you need to capitalize on the dips for a better tomorrow. This was all before I sold out of Canopy Growth though. That’s the excuse I tell myself to make myself feel better.

Easy Money

How you treat your parents might be related to how well you think your life has turned out. Once you’re near the pinnacle of your life you’ll probably ponder how you arrived there. You’ll realize your dad was grooming you for success and deserves much of the credit or sometimes parents tried their best but it wasn’t quite good enough. Sometimes their best was pathetic and should have been illegal. If your parents were unsuccessful in life then you’re at a disadvantage.

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If I had a dad or mom who had an interest in the stock market it would have at least given me an edge. The most common Canadian investments in the stock market are Canadian banks due to the oligopolistic banking system and conservative regulations. Even as a considerably safe stock they generate good returns.

In 1995 an 18-year-old could have about $1000 worth of Royal Bank stock or they could have bought a sound system for their car that went boom…boom…boom. Look at me…boom…boom…boom. If one could have delayed gratification that $1000 could be in the area of $15,000 today…BOOM! One could and probably would entertain the idea that a stock can go to zero. The odds of someone stealing your boom box within 1 year at 3 AM is about 1000 times greater though.

If I was someone’s dad I would say to my kid, “hey butthead, you want to spend all of your money looking cool to your friends for 5 minutes or do you want an opportunity to laugh at them forever?” Even better, I’d get them started when they’re pre-teen and buy them shares of a company to get their interest. 10 years will go by and they’ll be like, holy shit!You can’t tell kids anything, you have to inspire them.

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Above is a Toronto Dominion bank investment calculator. Just $1000 invested in 1973 with dividends reinvested would be $517,758 today. This beats investing in real estate on many fronts. You don’t have to mow your stock’s lawn or worry about your loser tenants plugging up the toilet.

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If this stock chart could go back to the beginning the line would be touching your feet. Sure, past performance is not a guarantee of future returns but if I had to invest my money this option looks promising.

No one in my family embraced the stock market which is why it was never included in the family curriculum. They probably heard you could make money in the stock market but more importantly to them you could also lose money. Humans are very uncomfortable with anything that involves risk especially if there is any possibility in their mind of their money going to zero.

I’ve learned that sometimes it’s too risky to feel safe.

Bad Stock Pick #3: Trican Well Service(TCW)

The stock price of Canadian energy, gas and oil stocks were said to be low. A BNN Guest, Eric Nutall, one who may be perceived as a stock expert in this field had been recommending Trican Well Service for months even as the stock price kept falling. To him it was ridiculous how low many of these stocks in the sector were.

Because I had just clocked in some easy money I thought I’d foolishly put it to work. Since Eric was so adamant about Trican’s outlook I decided to pick up some shares. It sounds like I’m blaming him but it’s more that I’m disappointed with myself and I’m using his face for my imaginary dartboard.

Throughout the year after I bought the stock it kept falling and Eric confesses one day on BNN that he had sold the stock since his last visit. It’s like your wife telling you she loves you to death and 5 months later you come home to your bed sheets that hold the smell of a musky man.

Another stock that would have broken my new rule: Would I tell my friend to buy it? I definitely would not have. Maybe this serves me right for investing in a company that fracks. By the looks of the chart the only thing the company is drilling for is zero.

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Bad Stock Pick #2: LGC Capital(LG.V)

This one is the most embarrassing stock pick of them all. A classic penny stock pump & dump. At first I thought of this stock as such but they had some interesting projects, and then a reputable guy in the cannabis stock industry had some semi-supportive words for this company. This same guy had also been picking many winners that I had missed so I thought I found my guy. It’s very possible this guy was paid by LGC to mention some supportive words in an article because I don’t think any professional would semi-recommend this company for free.

The stock went from $0.12 to $1 then it fell like diarrhea — fast and disgustingly. I caught the falling piece of shit at $0.50. Once again, after having cashed out some big profits I became loose with my money. It fell back to $0.12 in no time.

Lessons

  • Don’t catch a falling knife especially if it has shit all over it. A falling blue chip stock ain’t so bad.
  • In a volatile hot industry it’s best to stick with the leaders.
  • 50% off a penny stock is not a great deal.
  • a CFA designation and a nice suit don’t mean shit much of the time.

I’m not sure if this stock is a lost cause but I’m going to have to quadruple from where it is to get back to even. I’ll cut my losses if I get 3/4 of my money back.

Would I have told my friends to buy it? Hell no. I should have asked myself that before I pulled the trigger.

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Bad Stock Pick #1: Grande West Transportation(BUS.V)

Grande-West

When you’re barely out of the sophomore gates of investing you will make some rookie mistakes. After selling some marijuana stock that I made a nice profit on I became a little loose with my money. A few guys on BNN had no negative things to say about this one stock that had dropped 30% in recent months.

Without any good reason other than listening to so-called experts in suits, I bought stock in Grande West Transportation, a bus manufacturer in Canada. From $2.15 it kept falling steadily and is now trading at $0.95.

Lessons

  • Be careful with listening to the ‘experts.’
  • If a stock is falling for unknown reasons especially a largely unknown stock then there might be something you don’t know.

The company knew that it would not build and sell the number of buses that they said they would. Of course, people on the inside and close to the inside knew about this long before it would be made public. This was probably why the stock was falling.

It’s not a lost cause but the stock now needs to more than double for me to get back to even.

My Personal Opinion

  • Don’t bother with these small caps when you don’t have a good enough understanding of the industry.
  • Ask yourself before you buy a stock how you will feel if the stock goes down and you have to hold it.
  • Before buying any stock would you tell your friends and family to buy it?

 

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Investing Snobbery

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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.