Canopy Growth Corp. (WEED.TO)

This has been acquiring a lot of smaller companies. They have been issuing equity to fund a lot of their acquisitions. A $1.2 billion company, and it is very hard to value these companies. It will be very news and sentiment driven.

This stock can be really volatile. Hit a new 52 week high today, and then pulled back about 25%. If buying, don’t do it in one big chunk. This is the biggest of all the Canadian licensed producers. They have about 20% of the patients in Canada, and are starting to look at diversifying out internationally. This might turn out to be the global leader in medical and recreational marijuana. The sector has run up so much, and they still don’t even have earnings or positive cash flow.

There is a lot of heat in these stocks, and they have obviously done really, really well. Thinks they are very hyped at the moment. The best of these stocks, will ultimately be acquired. If you are looking for upside with a lot of speculation, this may be a category to look at, but not the kind of thing you want to risk your savings on.

Canopy Growth (CGC-T) or Aurora Cannabis (ACB-X)? He does not want to recommend either, but would take the larger Canopy over Aurora. This has an $820 million market cap valuation, and if they are lucky will have $40 million in sales next year. There is no rational way of evaluating these on any fundamental basis, so you are buying them on the anticipation that someone else is going to pay more. A very, very dangerous game.

There is some forward thinking by analysts and investors that the recreational use of marijuana is going to become legal, and companies like this will be well positioned. If that does happen, there will be another leg up on these kinds of stocks. Typically, in these very early stage industries, after the fundamentals play out and the dust settles, investors will start to question how many customers they will actually serve and how much money what they actually make. It is almost too early to do that, so stocks are going up and up on very little fundamental analysis by anybody, just on speculation. If you are in this, now would be a good time to take some profits.

A market cap of about $850 million, which is really high given that they don’t have any sort of net income to speak of. He is leery of companies that are too dependent on regulations or governments. Given that the stock has doubled in relatively short order, if you are sitting on a good gain you may want to take some risk off the table. Speculative.

The positive effect is when Trudeau announced he was going to legalize marijuana. However, we all know that when government gets involved, prices, supply, profits get controlled, and the opportunity suddenly shrinks down less than what you initially thought. He thinks it is going to be a collision case in what happens.

(Market Call Minute.) The 800-pound gorilla. If you think the recreational market is going to develop, then this is certainly the one you want to own. He owns a small position.

They have been raising money, and this appears to be related to a general effective promotion related to the regular tourist side of things under the Trudeau government. Although he holds it, he is not a convicted believer in it.

It is really odd that it sat around for June/Jul, then we had upside, so there must have been a good story breaking. This stock is really driven by news and policy changes. You are going to see a lot of fits and starts. You would want to see it not come back to the level of last November. A lot of the indicators are really elevated, suggesting it wants to correct. It may pause, or fall in price, or a combination.

A producer, grower, seller of medicinal marijuana, and probably the leader when they get into the recreational space. Medical marijuana right now is extremely, extremely hot right now. It is garnering quite a bit of US attention.

Not a big fan of the sector. The way the structure was set up in Canada with medicinal marijuana, they are going to have a very tough time being competitive in the long-term. Especially if there is de-legalization of marijuana. When you start to get recreational use, constraints that have been put around medical marijuana companies are not going to make them very economic.

They don’t have their own retail stores. There are a number in this sector and this is not the one in the sector he went with. They are not the lowest cost producer. They had problems when they were called ‘tweed’. It will be a growing business. The growth there is going to take longer than people expected.

There has been a little awaking in the stocks because Trudeau is turning on recreational use like the US. It is going to continue to become a growing business. He is not so sure how popular it will be for entertainment, rather than medical. He prefers Golden Leaf somewhat.

Medical marijuana. This is going to be a huge growth area over the next 10 years, but it is going to trade back and forth in fits and starts in the short term. This is the largest player in Canada, so they are very well capitalized and continue to build out both their farms and their traditional business. Longer-term you are going to do great. You probably want to trade around these things. Quite volatile. He’d like to see them turn cash flow positive.