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Wednesday will be a great day north of the border as Canada becomes the first major economy to legalize cannabis for recreational purposes. In anticipation of this historic event, the actions considered to be related to cannabis were quite volatile. This is how I play things.
An overview
To understand the legal trade in cannabis, you must first understand that it is not really a business.
There are companies that grow and produce the factory, there are companies that will sell to recreational users and others that only target medical uses. And then there are the large multinational corporations that have sought out or entered into legal agreements for the production of beverages, or other consumables to infuse THC or CBD into newly developed products.
Best of Class: Canopy Growth
In my opinion, Canopy Growth (CGC) is the best of the category in the pot. One of the main reasons would be the investment of $ 4 billion that the alcohol giant Constellation Brands (STZ) made in the company in August. Constellation, whose brands include Corona and Modelo beers, increased its Canopy stake from 9% to 38%, and Canopy CEO Bruce Linton spoke about the development of cannabis-based beverages.
Canopy, however, traded in a range of about 8 dollars Tuesday before closing at a 6.8% drop to 53.01 dollars. Since the action has successfully tested the $ 45 support level three times since the beginning of September, I would prefer to wait before buying the action:
We could also sell a November 16 stock of $ 45 instead of buying the stock directly.
Other weed stocks to consider
There are several other major players in this space that private investors need to know. These names would be Aphria (APHQF), Aurora Cannabis (ACBFF), Cronos Group (CRON), GW Pharma (GWPH) and the now infamous Tilray (TLRY). I say "infamous" because TLRY is best known since August for its extreme volatility that put the famous seller to the fore Andrew Left to the fore.
Rumors have recently surfaced of rumors linking Aphria and tobacco producer Altria (MO) to a possible minority investment. Other rumors of type co-developers on this project concerning Aurora and Coca-Cola (KO) would seem to have not become harsh news. Aurora has also recently made headlines because the company is about to relocate its US listing to the New York Stock Exchange.
This should give this name – which has fought the forces of dilution in the past – increased visibility and better accessibility for investors. Aurora is also the cannabis stock for which I have the most experience. The streets Shares under $ 10 Portfolio model, which I co-manage, has long been this name twice and won money twice. We are currently flat of the name, but we will probably buy it if it falls below $ 10.
The final result
You may remember that California had legalized the recreational pot on January 1 and that cannabis stocks rallied to the event, just as they did before Canadian legalization on Wednesday. But then, the sector has seen a selloff, and I think it's more than likely that the industry is still experiencing such a situation after Wednesday.
Many names did not return to January's highs before six to eight months. For those of you who have already enjoyed a great race, I could take a little something and protect your profits.
For those of you who are flat in the area and want to be involved, there are three ways to go, in my opinion:
- Best of class: Cover growth
- Less disadvantages with a favorable catalyst in the short term: Aurora Cannabis
- Some exhibitions without doing a lot of homework: Buy a cannabis ETF. The ETFMG Alternative Harvest (MJ) ETF trading in respectable volumes
(This article has been updated.)
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