Earlier this week, Rich talked about the stock market’s summer slump, and how this time period can be turned into an advantage for some investors. Pot stocks, in particular, have been experiencing a lot of downturn lately, and as of today, the industry reached a 52-week low on the Canadian index.
Cannabis opened this morning at $74.78, and quickly sank to $72.25, surpassing the previous 52-week low of $73.22.
Certain sectors tend to hibernate during the summer months, only to emerge in bullish form as the leaves change. Pot stocks tend to fall into that category, as Rich notes that last year the industry was doing much the same thing that it is now, and resurrected around late July. Though the stocks might not have reached a bottom yet, Rich reiterates that these low numbers provide an incredible buying opportunity for long-term investors in cannabis.
“This is the fourth red month in a row,” says Rich. “But I see green coming.”
“The Bulls are Not Out”
“The bulls are running in Spain, the bulls are not running in North America,” says Rich.
He discusses the fact that pot stocks have been underperforming lately. This partly has to do with the time of the year, but there’s also evidence to suggest that some of the industry leaders simply aren’t yet returning the investments that analysts predicted.
Infamously, this led to the recent situation with Canopy Growth Corp. (TSX:WEED) (NYSE:CGC). Last week news broke that Canopy, the biggest cannabis corporation out there, was parting ways with co-founder Bruce Linton, the man largely responsible for making the company so big. Canopy’s primary investor, Constellation Brands (NYSE:STZ)—which bought a major stake in the company at a cost of $5 billion—wasn’t happy that, under Linton, Canopy posted a net revenue of only $226.3 million CAD for its fiscal year-end result. That’s a particularly underwhelming number considering it posted a net loss of $670 million CAD for that time.
Speaking to Canopy directly, Rich says, “I said it was a mistake [to fire Linton] and I was right. Now the whole sector’s coming down because of you guys, and then CannTrust f**** up and the whole sector’s going down because of them too!”
On Monday, the cannabis industry was shocked to learn that a hold was placed on thousands of kg of CannTrust product. Health Canada found that CannTrust Holdings (TSX:TRST) (NYSE:CTST) had been growing cannabis in rooms that were not licensed, and that CannTrust representatives had been providing the regulating body with false information. When the news broke, CannTrust stock fell by more than $1.50.
“It’s a big black eye for the industry,” says Rich.
Pot Stocks Could Go Green Again Soon, But When?
“There’s a very good chance that things go green after a very big red day,” says Rich. Sometimes that happens on the Monday after a bad week, sometimes it continues to sink well into the next week or the next month. While Rich doesn’t yet see what the catalyst for regrowth will be, he is confident it’s coming.
One cannabis company that Rich says is a more trustworthy investment than CannTrust is Zenabis (TSX:ZENA) (OTCPK:ZBISF), which calls Health Canada “a partner” and not something to hide from.
“I want to know, are you guys buying today? Are you waiting? Let’s talk about it,” says Rich. Let us know in the comments what you think of the situation.
Featured image: DepositPhotos © VitalikRadko