Tips on buying cannabis stocks begin with how to conduct research and analyze them, where to find the necessary information, and timing your trades.
Research and Analysis
Look up stocks on Google by searching for their ticker or name: CRLBF, for example, to get news about Charlotte’s Web. Search for the term cannabis stocks to get a wide range of news. Google initially shows all results; after checking them out, click the news tab at the top for more information for newspapers, websites and other media.
After scrolling through the results and clicking on the links they contain for more information, scroll to the bottom and use Google’s “create alert” feature. Now you won’t have to search manually. You can also edit the alert to receive alerts once a day or more frequently, and in other ways.
Analysts vs. “Pop Analysts”
Some important tips on buying cannabis stocks come from legitimate analysts who work at an investment firm of some sort. “Pop analysts” write for websites like Seeking Alpha and Motley Fool. Pay more attention to the real analysts. Especially when they issue buy, hold or sell recommendations.
Pop analysts might deliver useful leads, but their headlines are often click bait. I specifically mean headlines like “Organigram vs. Aurora, which the Better Cannabis Stock?” And all too often they preach to companies, telling them how to run their business. Even though none of them have run or even worked at a cannabis company.
The Good, the Bad, and the Ugly
All companies have positive and negative sides. Write a list of the pros and cons of a company and weigh them carefully. What are their plans for expansion? What do you, and legitimate analysts, think their stock will be worth in a year or longer? Who is their competition and what makes you think they will beat them?
The ultimate question is “Why buy this stock?” Followed by “Why buy it now, or if not now, when? This is one of the vital tips on buying cannabis stocks.
Management is a Key Factor
Management is another critical factor. What experience do the executives have in the cannabis industry? Or in industries that would make them valuable, such as packaging, marketing or alcohol and cigarettes? Do any of the board of directors have political connections and clout, such as John Boehner of Acreage Holdings and Vicente Fox of Khiron?
Keep in mind that several stocks got beat up really bad in 2018-2019 after allegations of improper or even illegal conduct by company executives. These included Aphria, CVSI, MedMen, Liberty Health Sciences and most recently, Namaste. All eventually recovered. Except MedMen, which appears to be doing so in late February, 2019.
Look Up the SEC Prospectus
This give you information about the company’s financial situation for more tips on buying cannabis stocks. They must provide it to the SEC before going public. I recently decided not to buy a stock because even though it looks promising, there were too many red flags in the prospectus. Look these up on Google or another search engine. Duck Duck Go, for instance, does not track the sites you visit and record the keywords you search for, as Google does
Cannabis Industry Websites
More tips on buying cannabis stocks come from websites that focus on cannabis. Alan Brochstein, who has been in the cannabis stocks game for years, publishes New Cannabis Ventures. Most of the time he just runs company press releases. And runs a $599 a year website called 420 Investors where he has more to say.You can get free weekly updates from Brochstein from this site. On the right side of the screen, hit the “Read More” links.
My favorite analyst is Matt McCall. His Investment Opportunities site covers cannabis stocks and other sectors, offering unique insights and tips on buying cannabis stocks. These are based on speaking with executives and visiting their operations. Each month he issues email or text alerts about a hot new stock. And has a good track record. His site costs $199 a year. But he occasionally runs special offers for $99. And he’s the only analyst I’ve seen who says he uses CBD oil.
More Tips on Buying Cannabis Stocks
“When making a move, timing is everything”Tao Te Ching, an ancient Chinese book
When to Buy and Sell Stocks
The following are some of the most important tips on buying cannabis stocks.
Buying on the Dip
One positive aspect of today’s extreme volatile in cannabis stocks is that it presents occasional opportunities to buy successful stocks at a discount. When I buy or add on to a current position, I wait for at least a 5% dip. And never buy when a stock nears its 52-week or all-time high. Though, of course, there are rare occasions when I break rule #1.
If possible, go online early and watch the opening prices and the bid and ask for the stock you want to buy. If not, determine the most you will pay for the stock, and place a limit order before 9 AM. (Always use limit orders. So you won’t pay more than specified in your order. And sometimes pay a little less. Plus you can get a feel from the way the action is going before setting your limit. Also use limit orders when selling.
Buying Stock after a Lock Up Ends
In my experience, it is usually better to buy stocks in the afternoon, when prices are more likely to fall, except for a faster mover with heavy daily volume. Prices are more likely to be high before noon, then fall. So buy late, and sell early.
When a company goes public, the founders cannot sell their shares for a specific amount of time, which in many cases is 180 days. (Original stock owners, known as non-founders, usually can.) The specifics of the lock up are set by the company, according to regulations of the exchange on which the stock goes public.
Time of Day to Buy
Watch for the upcoming end of the lock up period for recent IPOs and reverse mergers. When insiders sell a lot of their shares, prices drop — which often creates a buying opportunity, for swing traders as well as long term investors. Tilray prices dropped significantly when their lock up ended in early 2019. Research upcoming lock ups and create a watch list for them.
Evaluate the Day’s Volume
More tips on buying cannabis stocks involve daily volume, the number of shares sold, ranges from light to heavy, compared to the average amount of daily volume for a stock. Light volume is harder to read than above average or heavy volume. When the price is moving up or down with heavy volume, this often indicates the trend is moving in that direction.
Also watch the bid/ask prices. More on that in a following page.
Don’t Chase by Changing Your Order
Stick with your first limit order price. If the latest sale price keeps creeping up, don’t change your order. Patience and discipline pays off here, in many cases, because more often than not your order will be filled.
This can be difficult to do if you stay online and watch the prices changing, like watching the ponies run at Belmont, so check in on every few hours at the most. There will always be tomorrow, and the market’s current volatility can be your friend at times.
This is more important for momentum players who are swing trading, than for long term investors. Though long term investors who are betting a significant amount of money on a stock should also pay close attention. The idea is not so much to save money by getting the lowest price of the day, but to acquire more shares of the stock, so it will reap even more profits down the long and winding road of the cannabis stock market.
Always Ask Why
One of the most important tips on buying cannabis stocks is to always ask why is a stock’s price up or down so much today? Or the overall cannabis sector up or down? Look for news, especially when it reports a legitimate analyst upgrades or downgrades a stock, either to buy or sell, that a major institution has invested in a stock, or insiders are selling or buying.
Before buying or selling a stock, ask yourself one more time why you are doing so, and why are you doing it right now.
Keep a Daily Logbook
Your trading platform reveals today’s vital statistics, such as daily high and low. But not yesterday’s. It is useful to be able to look up the closing price of a stock the day before, or longer. Charts show this visually. But I find that writing the data down is more effective.
For More Information
More on Investing in Cannabis Stocks
Disclaimer: All material in this blog and its pages is provided for informational purposes only and does not constitute financial advice. The administrator, members and posters do not accept liability for your use of the posts, comments or content of this blog, which is provided on an “as is” and “as available” basis, without any representations, warranties or conditions of any kind.