Aphria Inc (APHA.TO)

It did exceedingly well the last couple of years. It all peaked out in the spring this year. Price momentum is waning.

Chart shows the stock reached a bottom recently, but has pulled back up again. His concern would be if it broke below $4.20. A lot of these “risk stocks” move with the market, and have nothing to do with the industry itself. Although technically this is fine, his concern would be if the market pulled back, people overall may just get out of this in order to reduce risks.

Thinks this is ultimately going to be a huge growth business, and Canada is probably going to be the trendsetter as far as growth goes. Expects this will become one of those global companies that ends up taking massive market share as the years go by. He is waiting to see how provinces deal with this on regulations. If you are a longer-term investor, you just ride this out, but if you are a shorter-term investor, you should be tactical and when things are crazy and getting out of hand, you trade in and out.

He owns no marijuana stocks. This company recently put out their earnings, and as far as he knows, it is the only cash flow positive marijuana production company in Canada. Their cost of production is about $1.11 a gram, and low cost these days is $2 or less. They are also taking some of their product and producing oil, which is important. If you end up with mold and run it through a distillation process, you can quite happily extract the THC and CBD, giving you a product that gives you no concerns. Also, the oil has a 5-year shelf life, so it can be used in future applications such as edibles, vape pens, etc. What happens to the industry in the summer of 2018 and will the consumer be there?

Just reported results today and it looked like a reasonable quarter. His concern is the overall industry structure, and the lack of clarity around regulations, and who were going to be the ultimate survivors. There are just too many uncertainties at this time.

They report on July 12^th before they harvest any of the expansion plants. The July 22’nd reverse takeover is a big thing for them and is their growth platform for the US. They know how to grow Cannabis. Don’t rush out to buy it until we get the quarter over with.

He questions if this a marijuana grower or a hedge fund. They raised a bunch of money in the last year or so and has started investing in a bunch of small cannabis related businesses. They also have corporate bonds on their books. He wonders what they are doing. He doesn’t understand it. They don’t seem to be strategic investments. Thinks the stock is overvalued and wouldn’t want to own it.

Not particularly comfortable investing in marijuana stocks. An investment has to have a margin of safety around it. The marijuana sector is just too unsettled right now. Also, who is to say that the tobacco industry doesn’t want a piece of the action? They have expertise in lobbying, distribution, marketing, branding, etc. Also, wouldn’t Short it as who knows what heights euphoria could take it?

A great facility in the making. They have 1,000,000 ft.². It is engineered so that marijuana can be grown, processed and packaged by itself. They had flat sales, because January and February were grey. Doubling their space, and by August they will be producing and selling twice as much product.

Of the major producers in Canada that were originally public, this is probably the best as far as management teams go. They know greenhouse growing very well, and it is probably really high quality in Canada. However, a lot of that has already been built into the stock.

There is no way to analyse marijuana stocks. They don’t have any earnings yet and they’re completely speculative. However, it is going to become a legalized area in Canada, and you want to go with the big guys.

As far as medical marijuana companies go, this is probably one of the stronger ones from a couple of different metrics. They have 2 different parts of their management team, one comes from the vitamin/pharmaceutical side, and the other a gentleman from the growing side. They are one of the big greenhouse operations, so costs would be a lot lower than some of the indoor growers. Thinks these things will be huge growth stocks over the next 5-10 years, but the sector can be very volatile. Be cautious, especially with valuation. He owns some of their warrants.

Not a lot of price history, because it is a new stock. The trend looks good, but the only caution he would have is to take a look at volume. Smaller stocks don’t have enough participants, so therefore the charts sometimes may not be as indicative as a stock that has a bigger audience. When you are dealing with regulations and politics, it is a big unknown. He would be cautious.