Canopy Growth Corp. (WEED.TO)

APH-T vs. WEED-T. It’s always good to be diversified, should hold both. They both seem to be moving away from the pack to the upside.

Doesn’t own any of the cannabis stocks. The problem is, valuation. Market cap on this company is significantly larger than any multiple of sales you can put on it. The sector is still very much news and sentiment driven.

When evaluating a company, he looks at the fundamentals like revenues, profit, ROE, etc. These companies don’t have that yet, so are trading on future expected sales. When buying companies like this at this point of time, you are speculating, not investing. If you want to buy a marijuana stock, this is probably the one to buy. They are the biggest player. A rhetorical question would be, what happens if the Conservatives win the next general election, and they turn around and make this illegal? He doesn’t like the risk.

One of the first out of the blocks. They built a diversified portfolio of production facilities. You don’t need to rush out and buy this one. You need to know how they get shelf space for their product. 18 million packages would have to get shipped in order to make mail order work.

He can’t do the seasonality of marijuana stocks, because they are too recent and too volatile. Technically this had a double top, and it broke below that. That suggested downside potential. He expects that $8.50, which was previous support, would now act as resistance. Bumping up against the 200-day moving average gives him caution. It is trying to find support at its 20-day and its 50-day is starting to level out. Momentum is starting to come back into the stock. You could place a stop limit at the 20-day moving average, which is currently at $7.80 and play the trend.

The granddaddy of global cannabis platforms. Their patient numbers continue to ramp up. In a few years it will continue to dominate both Canada and International players. He would add it back. You need to hear more back about how this stuff will be sold. When they form a base he would add it up to a full position going into the fall.

The major problem with the marijuana industry is that the companies have not been around for 10 years yet so he does not buy them. There has been some blow off in the industry recently. A lot of companies are not going to make it in the industry.

This is very driven by news and momentum. Although we have some rules, it is not clear and hopefully it gets legalized next year for recreational use. Still very early stage. It is hard to value these companies as they are not generating earnings.

A hot, hot space in the Canadian market these days. He owns nothing in marijuana. If he did, he would be trimming his positions if not exiting altogether. The stocks have had massive runs. There is an opportunity in the longer-term, but if you look at the market valuations relative to the actual profit generation opportunity over the next 5-10 years, they are super expensive. He would urge taking profits.

He was bullish on this before the US election, and it did well. Since then it has dropped quite a bit. This company is going to be a survivor. They are doing an online mail order. Instead of paying a retailer a big margin, they are going direct to customers with mail orders.

When you have a new industry, you find a company that is a consolidator in that industry. This one appears to be that leader. To get exposure to this sector this is probably the stock you should own. He is not participating in this sector as it is too speculative.

He is not a fan of these stocks. The valuations are based on nothing. Potential supply just keeps coming on and on. Big tobacco will end up getting into this business. They have the money, distribution and knowhow. Some of these cannabis companies will survive and some won’t and he does not know which won’t. They are not investments. They are gambles.

Short the stock on the basis of marijuana prices dropping? The pricing of marijuana in Colorado has been dropping like a rock, something like 10% a month in the 1^st year. The average selling price now is about $7.50 a gram, and there is going to be some pressure on that, especially as the market matures. Right now, demand is still outstripping supply. As companies raise money and bring up production, that probably changes. However, the end market is hard to quantify at this time. As far as Shorting goes, you can certainly make money on it, but you have to be tactful. When things go crazy and straight up, that is the time to put Shorts on. Also, when there is a lot of equity financing, that is probably another time.

(Market Call Minute) There are no barriers to entry in the business. If it gets legalized for recreational use then everyone will be growing it in their back yard. There won’t be any margin left.

Canada’s leading medicinal marijuana grower. It has had a meteoric rise in the last couple of quarters. He tends to take a conservative stance to early stage businesses, and has not participated. He would be particularly cautious where the whole regulatory framework is up in the air.