The following is no way an attempt to take a victory lap. It is a simple and common performance analysis of my work over the last 90 days. On July 20, I published “Advisory on Stocks in the Legal Marijuana Sector,” highlighting 4 different stocks in the Cannabis sector; GW Pharma (GWPH), Zynerba (ZYNE), Kush Bottles (KSHB), and Mass Roots (MSRT). For historical purposes, all price quotes are marked to the close of business on July 19, 2016 and closing prices for 90 day performance analysis are marked to the close of business October 17, 2016.
In no way is my analysis a solicitation to buy or sell any of these securities, nor do I have holdings in any of the companies mentioned in the article. If anything I have some concerns regarding valuations in the near term based on excellent 90 day performance data, but moreover being financially minded and focusing my expertise on the Cannabis sector at this point in my life, the prices and timing were excellent for entry not to speak up. The fact is, there are indeed bona fide opportunities in the Cannabis Sector for today’s investor to make money and there will continue to be opportunities in this emerging market for years to come, with thatsaid here is my 90 day performance review.
GW PHARMA (GWPH)
On July 19th GW Pharma closed at $90.94 and closed 10/17 at $126.87 a $35.93 gain and represents a 39.5% gain for the 90 day period. GW Pharma remains the absolute leader in cannabinoid pharmaceutical medicine and I believe will be a favorite of Wall Street for years to come. They were mentioned favorably by Cowan and their large cash position and massive head start in the sector will serve as a huge advantage over any other competitors.
Institutional investors love the critical mass of their market cap, stock price and the high amount of daily liquidity in the stock. I believe sometime in the next 18 months that a target price of over $200 is attainable depending upon market conditions, industry developments and the ability of cannabinoid medicine to infiltrate a larger target market as legalization takes hold and Cannabis based medicine becomes more widely accepted in the mainstream as a healing agent.
The stock has performed very well in the last 90 days hitting a high of $137.88, but I am reluctant to rush in and purchase today at these levels as the chart looks a little tired as I review it now. Also the market may get spooked a bit prior to Halloween and a little closer to the election chaos and after all it is a tradition to bring up the events of October 29th 1929, along with the corresponding negative crash talk, so pick your spots. GWPH has the capacity to be a tremendous trading stock and may have large and volatile swings. The shorts had their way with the stock for awhile and had beaten and knocked this stock way down and it has finally recovered significantly. Nonetheless multiple solid trades have been available this year in GWPH because of this dramatic swings as the bulls and the bears battle, so review your charts!
I believe there will be several wild swings ahead and opportunities to make money in for GWPH both long and short as the melee for money continues, so watch the momentum indicators and stay disciplined. Long term I would have to view GW Pharma as a Buy as the company continues to develop its business model worldwide and as favorable changes in U.S. law become a reality their markets will spread accordingly. I believe GW Pharma’s future business prospects are very strong and their fundamentals are first rate, but do yourself a favor and watch the charts so you don’t miss or give away profits, remember a stock is an investment vehicle, not a marriage.
Accordingly the person who is currently positioned long, should remain very aware and potentially examine short and long term goals with the stock as well as option strategies to hedge your position, let alone strategies to reposition. I am not beyond shorting a stock, and there is a lot of money to be made doing that make, so make sure you investigate as the concept is not to be discounted, given the proper entry point. As usual the timing of such activities is essential. A retracement down the stock to 110-115 dollar level near term would not surprise me and I think the investment will be capped at 20% potential upside through the end of the year. If I was long I would position myself with that risk reward thought in mind.
Kush Bottles (KSHB)
Kush Bottles has had a tremendous run up and was recently highlighted in a research report with Cowan and Company. When I released my article the closing price of KSHB on July 19, 2016 was 1.65. When I was writing that article the week before the stock price was 1.35. So needless to say Kush Bottles has had a tremendous run up since then, reaching a recent high of 5 dollars and closing on October 17th at $4.33 “Kush” is reflecting a 162.4% gain accordingly for the 90 day period.
Kush Bottles is one of my absolute favorites right now and has certainly has got Wall Street’s attention as well. Kush has very bright prospects to benefit from further legalization in the West.
They have achieved critical mass in each of their territories and I’m sure their potential market reach will be expanding for years to come. The fact that the stock has achieved a price of over 3.00 opens it up to a much wider variety of stock buyer including institutional investors who often times do not like to participate in stocks trading below that level. Also the fact that they are most likely going to be profitable at the bottom line for 2017 sets them as a breed apart and one of the firmer financial choices in the publicly traded Cannabis Sector.
KSHB has gross profits throughout 2016 and I expect 2017 their profile to improve with profits translating to the net income line. The stock has had an enormous gain in a very short period of time. KSHB for sure is one of the companies in the best position to monetize immediately from changes in U.S. law in November and probably is exactly why it is getting so much near term attention, the favorable research report increasing investor awareness doesn’t hurt either. Mind your profits though as profit taking on election results in the same vein of buy the rumor and sell the news may provide some near term theatrics.
Regardless, I do believe that within the next 12-18 months a price point of 7.00 to 10 is attainable depending upon actual company performance and how exaggerated the stock market becomes during that period.
Zynerba has intrinsically doubled since I released my article, as of close of business on 7/19 the price was $7.32 and hit a high of $14.50 on 10/7. The maker of transdermal cannabinoid patches has been a wild trader after an IPO in the mid teens it ran into the forties. Before retracing and eventually becoming dramatically oversold several times at one point trading at book value. This provided a savvy and conscious investor lots of opportunity to buy low and profit quickly because the action was fast and furious after a few days at deeply discounted prices.
In July when I recommended ZYNE for purchase, the stock was $7.32 as per the close of business July 19th, and for the 90 day performance review the stock closed on 10/17 at $11.27 showcasing a 53.9% gain. ZYNE is an explosive situation and I fully expect Zynerba to be a name at the forefront of the Cannabis investors shortlist and will provide many trading opportunities in the next 3-6 months. Similar to GW Pharma, Zynerba has been prone to large trading swings based on momentum investors and the pressure from the heavy handed shorts. I do think the stock has the potential to be trading in the next 12-18 months in the 20.00-30.00 price range consistently and could potentially shoot into the 20’s within a series of 5 days given the right news and market environment , but beware ZYNE is a wild one! As such the volatility of Zynerba may be much greater than some investors are used to, and the size of their positions should be gauged upon that tolerance.
MassRoots was .72 cents when I rated the 3 other companies and I coded it as a stock I would avoid which is a little bit of euphemism because if you aren’t prepared to buy a stock, intrinsically you consider selling it or shorting it. Since my recommendation MassRoots tumbled to a low of .38 on September 30th a 47% drop and closed on 10/17 at .63 cents a 12.5% profitable slide based on a short position. The company has recovered in recent days with positive news but here is why I am not drinking the Kool Aid on this one just yet.
MassRoots, their phone system basically goes nowhere. And I’m pretty sure their business is going to do the same unless they have a dramatic change in strategy and monetization model.
Adding users is great, which they anticipate with further legalization, adding significant revenues is is way better. I’m not trying to be cruel here, but I put a phone call into MRST prior to the article being generated on 7/20 and Voicemail literally went nowhere, I couldn’t even leave a message. Prior to penning this article I left a message at approximately 1:30 eastern standard time on October 13 stating that I was interested in the company regarding investment, stating the matter was time sensitive and could they please call me back at their earliest convenience.
To date I have not heard back and I don’t expect to. The email inquiry I put in months ago, only received an auto response of “hey bud” with something akin to, your inquiry is important to us will get back to you soon, but they never did. As I denoted months ago they were burning large amounts of cash and subsequently during the last 90 days they defaulted on a six month secured promissory note totaling $966,000. On October 10th the company announced that it closed on a $3.2 million equity financing and that will clear the debt and that they are slashing workers and executive pay, great!
However without this cash they would have been broke and to my knowledge nothing has changed with the guts of MassRoots’ business model and I do not believe this company can succeed the way they have it all structured. The cash infusion is terrific, but unless it yields a significant change in their monetary profile, it will only be good money after bad.
Legalization in other states in November, will be welcome news for all of these companies, including MassRoots, but that does not mean that legalization will result in additional upside in any of these companies stock price in the near term. Currently, I am doubtful of the ability of MassRoots to monetize any additional users into revenues and net income and on Wall Street “it’s not show friends it’s show business.” I will continue to observe MSRT, but I still am unable endorse going long in their stock and must maintain my avoid rating as the situation is just too cloudy and as stated without a serious change in their organizational direction, I fear that MassRoots will continue to degrade in price and may be available in the next 18 months for .10-.20 cents on the 1.00.
I welcome a return phone call from MSRT to discuss it all, but I am unable to justify taken a long position.
I wish you all happy trading and I ask that you please vote to legalize cannabis in all its forms for the greater good of our country and and the American people