Pot stocks are in a bear market this summer, as even many of the biggest cannabis corporations are not delivering according to investors’ expectations. Rich walks viewers through some of the reasons behind this situation and notes a few important buying opportunities that pot stock watchers should keep their eyes on.
Pot Stocks are in a Summer Slump
“The markets are going crazy right now,” says Rich. While this might cause some investors to feel concern, it’s a pretty typical occurrence. Stocks tend to perform poorly in the summer as compared to the other seasons of the year, picking up again in October right as the weather begins to chill.
One reason for this is that a lot of investors and industry movers use the summer to enjoy a vacation from the work they do, giving rise to an old school stock market aphorism, “Sell in May, then Go Away.”
Some analysts, however, think there’s more to this slump than meets the eye. It could be that, as the world becomes more interconnected with digital communication, investors will never really take a break from the stock market, even if they’re vacationing in Cancun with their families. Plus, those who pay attention to the market year-round have an opportunity to make some interesting, low-priced investments while their contemporaries are distracted.
Rich Predicts a “Ressurection”
While pot stocks are no exception to the summer slump, they will eventually return to an upward trajectory according to Rich.
As of today, the cannabis industry is nearing its 52-week low on both the Canadian and American indexes. Top companies in the industry are currently focused on long-term growth, which might not do a lot of good for day traders and short-term investors, but will most likely pay off for shareholders who sign up for the long haul. This situation also presents an opportunity for what Rich calls “bottom hunters.”
“If you’re a bottom hunter … this is what you’ve been waiting for,” he says. “To be quite frank, if you’re looking for an investment opportunity, right now might be the best time to position yourself in some of these [cannabis] companies.”
Scrolling through a few of the top companies on the pot stock index, Rich identifies some of the more attractive investments. Aurora Cannabis Inc. (TSX:ACB) (NYSE:ACB) and Aphria Inc. (TSX:APHA) (NYSE:APHA) are two buying opportunities that Rich picks, as both companies have a strong potential to move their numbers up.
In particular, Aurora—which currently sells at $7.34 USD—is continuing to make strategic investments that will make it a leader in the American CBD market, as well as similar markets in Europe and South America. The company is already a production capacity leader, outshining Canopy Growth Corporation’s (TSX:WEED) (NYSE:CGC) approximately 520,000 kg peak annual output by between 150,000 and 200,000 kgs.
If there’s any cannabis company that investors should jump on while stocks prices are low in the summer, it’s Aurora.
CannTrust is a Short Seller’s “Dream”
The industry was shocked recently by the news that CannTrust Holdings (TSX:TRST) (NYSE:CTST) was growing cannabis in rooms that weren’t licensed. Health Canada promptly put a hold on thousands of kgs of product, and the company’s stock took an immediate hit, falling $1.50 on the first day and now hovering uncomfortably around the $4.00 mark. While a lot of pot stocks are only experiencing a temporary slump in the summer, CannTrust does not seem to have the legs needed to bounce back.
“It’s going to get real ugly before it gets better because everyone and their sister is going to short this stock,” says Rich. “Anyone who owns stock [in CannTrust] is probably going to panic sell and get out.”
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