It's interesting to look back to last month and remember the anticipation that MJ Penny Stocks sector investors had for April. Changing federal laws in Canada along with 4/20 (marijuana's holiday) were expected to be a media bonanza that would bring much green to MJ investor's portfolios.
But with Canadian law changes in flux, a large correction for the broader markets over the last couple weeks, and the shocking SEC suspension of PHOT, I suspect many MJ investors are not in the place they thought they would be today.
FINRA and SEC actions have most definitely cast a shadow of fear and danger over the MJ sector. I personally find their lack of communication concerning the specifics on why they suspend a stock disturbing. I cannot respect these branches of the US Gov't in what seems like reckless abandon for investors in these recent suspensions of CANN and PHOT. The lack of oversight, disclosure, and transparency in these organizations is leaving many affected investors viewing them as somewhat terrorist in nature and extremely far from their stated goal of "protecting investors."
Because of the significant lack of transparency of SEC's FINRA-assisted actions, there is much speculation that their goal is to create fear in the sector by going after the most popular companies before tending to smaller and more blatant offenders. I've read many posts by investors reasoning that the goals of recent actions are being perceived to be seeking to 'cool down' the super hot sector. Even if this speculated upon goal isn't true, over the last week it certainly has felt like that theory has a lot of merit. Ultimately, the seemingly malicious threat the SEC presents to Marijuana stocks sector investors continues to be real. The huge volatility of these stocks came into play to the downside for several days after PHOT's suspension. Many of the sector's stocks seemed to finally find the bottom on Tuesday before a respectable rally for many tickers to close the last two sessions of the week. Blood was most definitely in the streets last week and with an extreme amount of fear and uncertainty in the air, those that dared to buy the fear got what may turn out to have been some amazing discounts on new shares.
Eric Holder 'Cautiously Optimistic' About Marijuana Legalization in WA and CO- HuffPo Canada's New Marijuana Laws Set the Stage for Growth in 2014 - Marketwatch
How legalized Pot Would Change America - interview with Mark Kleiman Without any help from the SEC, investors are seeking to get to the bottom of why trading was suspended on two of the most highly regarded and visible MJ penny stocks. While we have many more questions than answers still, I remain hopeful that we will get some clarity soon.
But with the persistent presence of scams, the known pitfalls of penny stocks, deceptive PR's, and SEC halts, it is no wonder why so many potential investors are sitting out. I cannot argue that it may be wiser for risk-averse investors to wait until the industry leaders have developed and then invest at higher prices but with more confidence. That is not the strategy for me however, as I understand and am willing to take on the risks in seeking the massive potential rewards of finding the companies most likely to benefit from this changing legal landscape, and hopefully well before the rest of the market figures it out.
Mitigating this Environment of Fear In previous entries, I have been very clear concerning the risks abound investing in this sector. For me, the name of the game here is to seek and buy only quality. I only want to own companies with access to capital, solid management teams/CEOs, and promising business models. Very few MJ- related businesses today hold all of these qualities and of the available 150 or so tickers, I currently hold very few in this regard.
With the SEC suspending PHOT, the most well known MJ stock, many investing strategies for this sector have been put into question. With fear of more SEC halts on the way, it is being highly speculated that trading is the safest route going forward and that this sector is no place for long term investors at this point. Some sector investors are not even willing to hold many of these tickers overnight, choosing instead to buy at market open and sell before the day's close.
Throughout my investing history, I have found MUCH greater success in buying good companies and holding them until I felt they had reached the point where the downside risk outweighed further upside potential. On top of that, my particular tax situation makes it much more difficult to be a profitable trader come tax time. So while I understand the motivation to not want to keep money in any MJ company for very long, I personally must continue to seek the only the best of breed companies where I can feel comfortable with their long term potential and being able to keep my money invested.
PHOT Suspension - The Questions Continue It's important to realize that nobody really saw what happened to PHOT coming. I think it is very fair to say that although CANN had just been halted and every indication was that more halts were coming, that most investors were expecting many other tickers to have problems before PHOT ever would. The company was widely regarded as the 'safe' MJ play by many, and this week PHOT seems anything but safe.
While the SEC's suspension of PHOT trading continues to weigh heavily on investor's minds, many are hopeful that we will become privy to new information prior to the shares re-opening for trading this Friday April 25th.
It is clear that as of right now many current PHOT shareholders are planning on selling as soon as possible in light of alleged and nondescript problems from the SEC. Some have declared they are holding in the belief that the SEC is wrong or that whatever their concerns are will not play into the long-term growth story for Growlife as a company. And I have read that still many others are looking at this re-opening as an opportunity to buy PHOT shares cheaper than they would have likely ever been again without such an occurrence. With the absurd policy of no required further disclosure following SEC trade suspensions, investors are clearly being left in the dark in navigating this situation.
One thing is for sure, suspended stocks always take a dive when they reopen for trading on the grey market. The question is how low does PHOT go before bouncing and beginning to stabilize? Many will be watching and as shareholder, I am still waiting for more information to base my decision on, whether to sell or hold. Without any further guidance from the company and no further declarative statement from the SEC, one must seriously weigh the lasting effects of this suspension, validity of the concerns, and the ability for PHOT to return to a place of confidence to continue on as a shareholder.
While PHOT may very possibly turn out to be a major disappointment in regard to a buy and hold strategy, the jury is still out and many are hopeful that we will get better information to digest soon. Without it, I fear that many investors will choose to liquidate their PHOT shares in favor of moving their cash to other better perceived opportunities. For me, barring the release of any new information being presented this week, the SEC suspension will weigh heavily upon my decision to hold, sell some, or sell out of PHOT in the coming weeks.
CANN is still trading on the grey market but has made a rather spectacular rebound since trading was re-opened last week. After falling form $29 to $7 upon re-opening, just a week later the pps touched high as $25.50/share Thursday and closed the week at 22.40. This company's stock is known for having a very small float, and a few of my sources have rumored that CANN is close to closing a new real estate deal possibly in Canadian market.
The SEC has not made any further statement on why they chose to suspend trading on CANN, and for now, traders seem to have challenged the actions as largely invalid or otherwise remedied in this case.
I do own CANN shares and will consider selling upon a pps increase that may result upon a new deal announcement from the company in the near future..
Q&A With Advanced Cannabis Solutions CFO Christopher Taylor on SEC Trading Halt
With FINRA and the SEC seemingly on a witch hunt through the American MJ sector, my focus has turned largely towards the available Canadian companies to mitigate risk. In spite of this, I continue to hold a large position in TRTC. The company has been picking up new distributors for its Edible Gardens brand of hydroponically grown produce, and company's CEO Derek Peterson continues to represent the company extremely well in expanded media coverage.
The company has been forward with its plans and abilities to switch to large-scale MJ cultivation once federal laws would permit, but for now, Terra Tech continues to seek profitability in the growing market of organic produce production and continues on with their infrastructure expansion. Terra Tech Investors Undeterred by PHOT Trading Halt - Mainstreet
NJ's next cash crop? Terra Tech Corp. builds greenhouse, hopes to grow pot.
Medican - MDCN While the American MJ-related companies appear to be operating within an environment full of threats at this time, the Canadian market has the blessings of the government and is in full-on development. Last week, while I was digging deeper into the available publicly traded Canadian MJ companies, I found one that seems very promising. Through research, communication with fellow investors, and a couple recent SA articles on the company, I decided to open a position.
Is Medican a future power player in the Canadian MJ market? They certainly appear to be positioning themselves to become just that. A relatively low pps and incredibly low trade volumes right now tell me that this company is either severely under appreciated or largely undiscovered by investors. While the company is not currently in possession of a cultivation license, the management team assembled here along with recent transactions imply to me that the company is on a path towards becoming a major player in the Canadian market. I've DD'd the company enough that I feel comfortable building a position and am planning to see this one go up nicely as their plans progress. Although I do feel that ATTBF is a better speculative play at this time, MDCN has found a place in my portfolio and I have positive expectations for the company.
Canadian Marijuana Stocks Medican and IHMML Give Investors a Reason to be Bullish Medican Seeking a Pot of Gold in Canada
Abattis Bioceuticals - ATTBF
ATTBF has solidly become my strongest conviction for what I believe could be outstanding short and long term performance. The Canadian company currently holds no debt, over $3mm in cash, has multiple licenses pending, and a diversified business model. The stock has seen recent insider buying and it seems to me that the company is firing on all cylinders in moving forward in their MJ-related growth initiatives.
The stock was slaughtered along with the rest of the sector last week and on Tuesday plummeted to lows in the upper .60's. I felt a bit like a madman in buying some with so much fear in the air and the strong potential for the pps to go even lower. But by Thursdays close, the fear had greatly receded and my brand new ATTBF shares currently sit at an unrealized 72% gain.
ATTBF is currently my largest MJ-related holding and while I will typically try to abstain from making public price projections for stocks, I feel comfortable declaring that I am anticipating $2/share in the short term (30 days) and $3+ in the longer term. It is my opinion that anything under $1.50 is a steal and ATTBF shares available under $1 last Monday and Tuesday were a serious gift.