Apparently, our friend kaimu is “all-in” with Cannabis. Hmmm…I may be skeptical, but I also have been known to be wrong, so today I will write a little about a subject I know very little about and maybe kaimu or others will take my lead.
Many US States have legalized the use of cannabis (marijuana) products, some only for medical uses and some for, I suppose, pleasure. I’m not a user but at least I can look at the market as a portfolio manager would, and I think you should if you are contemplating an investment.
My quick-and-dirty research turned up 32 public companies in the Cannabis industry.
List of Cannabis stocks:
For all these companies, you can insert links to information from 4-traders.com or Yahoo Finance. If I had time, I would do the links for you.
You can also discover a lot of info for OTC stocks at:
http://www.otcmarkets.com/home
My checklist would be as follows:
1. Build a file for each company in the industry that includes at least the most recent regulatory filings and the files at market big data companies like Yahoo Finance, ADVFN and 4-Traders.com. Drop to the bottom of the list all companies that do not file or are market Caveat Emptor by the OTC market.
2. If there is no industry benchmark, create your own. I would determine the stocks in the industry with the highest price and volume correlation, which would give me a focus group to study money flow in and out of the industry as well as industry trends and cycles to measure each stock against?
3. Study the regulatory filings of revenues and earnings data and the Management Discussion & Analysis. If there are financial summaries being reported, do a quick financial insolvency test. Note the anticipated next reporting date.
4. If there are securities industry analysts who follow a company, glean as much info as possible. Take note of the firms the analysts work for because the larger the firm, the more due diligence is involved.
5. If there are Seeking Alpha writers who follow a company, take note of the writer’s popularity and track record. Take copies of their notes.
6. For all company news releases, make copies and decide if the content is meaningful or fluff.
7. For any magazine article, make copies and decide if the content is meaningful or fluff.
8. For chat room discussions, determine which companies are most popular and make copies of the “chat”.
9. Review the short-term and long-term charts of the stocks, making notes of trends and cycles, liquidity and so forth.
10. Find the names of the promoters (CEO and Directors) and biggest shareholders and investigate their history for signs of success or failure.
11. If a company has bank loans, find out which bank they deal business with because that loan required layers of due diligence of info that is not made public.
12. If a company has institutional investors, you can presume that investment also required layers of due diligence.
This list is not complete. It’s just what was on the top of mind when I decided this morning to follow up a comment by kaimu.
As I see it, any individual investor who is seriously interested in an investment in a Cannabis stock ought to be able to build a valuable research folder in a couple days. If you were to invest say $5,000, and your money doubles, possibly in just a few months, then the return on your invested time and money would be well worth it. If you have an investment club, at least your time requirement for research would be much shorter.
These companies, even the biggest of the lot, are highly speculative. I believe that most will end up in business failure. To find the viable companies that eventually will succeed, will require much time and patience. Each reporting period will require dedicated focus because any disappointment there will result in an immediate price drop or, perhaps, collapse.
For these reasons, I am not an investor in Cannabis stocks. But if you are so inclined, then good luck. As I say, maybe kaimu can be a help.
