Shhhh, this blog posting is about something that's currently illegal in my home and native land, Marijuana, Mary Jane, Wacky Tabacky, Pot, Weed, Cannabis.
A lot of Marijuana stocks have been roller coaster rides for the past two to three years as American states like Colorado legalized weed. Then last year Canadians elected a Liberal government headed by Prime Minister Justin Trudeau with the legalization of marijuana being a key platform plank. That sent MJ stocks on another wild ride.
Prime Minister Selfie (as Conservative critics have dubbed him) admitted smoking up while visiting with friends when he was sitting in opposition to the then governing Harper Conservatives. That revelation led to a funny little exchange on Canada's 'This Hour has 22 Minutes' comedy show.
No matter your opinions on JT's politics, ya gotta admit the guy is pretty cool...but enough preamble.
What's going on with Marijuana as a potential investment vehicle?
As noted in the subject line, marijuana is projected to generate $10 billion a year in Canada, and likely even more. And if Canada's Liberal government makes good on its pledge to bring in legislation by the spring of 2017 the overall sector will probably explode again.
That's good and bad.
The good is that there will be companies capitalizing and delivering solid fundamental results. The bad part is that once again there will be all kinds of penny stock scams out there touting the $10 billion figure while dumping shares into the excitement. They'll take the cash but never deliver one thin dime in long term shareholder value.
I want to be clear on something here. If you're just looking to flip in and out quickly....then often times it doesn't matter whether the company you've invested in is solid for the long term or not. I've written a lot about Lithium here, and that's exactly what happened with a lot of junior miners. Companies put the word Lithium in their name and, BAM, they popped. Sometimes by 100% in just one day.
But if you're looking for a long term investment...then caution is warranted.
Peter Lynch of Fidelity fame once famously quipped: "Buy what you know". The thinking behind that axiom is that if you're familiar with a particular industry, that you'll be more adept at making wise investment decisions. But a lot of times investors storm into penny stocks because they know something about a particular industry, and lots of people know at least a bit about marijuana.
Many people have smoked weed, and like it. Some probably think of themselves as a having a "PHD in THC" because they've committed dialogue from Cheech & Chong movies to memory....they think that qualifies them as experts. Sad but true. And the companies that show up on people's radar are all too often hyped up penny stocks.
There's one Canadian company in my view which pretty much epitomizes this mentality, with investors buying into a stock based on forward looking promise, hype and promotion.
Puf Ventures has the perfect ticker symbol for a marijuana stock, PUF on the Canadian Securities Exchange or CSE. Canada has three exchanges, and if you do some research you'll find that the CSE has easiest reporting standards which in my view makes it the riskiest. I would equate it to the American Pink Sheets sometimes called the "Gray Market".
PUF has been promoted by an outfit called Prosperity Stock Report which discloses having participated in a Private Placement priced at 5 cents, and with the stock trading currently around 9 cents, they've done well if they've been selling. Interestingly PUF recently announced they bought into some mineral claims which may contain Lithium. Here's a link to that news:
Here's what it says in part:
"...in order to capitalize on the recent surging demand for Lithium, it has acquired a 100% interest in certain mineral claims (the “Claims”) located in Quebec, Canada, known as the Lac Saint Simon Lithium...."
Regardless the company says it is committed to its strategy to become a licensed producer of marijuana.
I'm going to end this blog posting here....but I will add this link to a site that lists the companies that comprise something called the Marijuana Index, and the Canadian companies that comprise it.
I would advise caution with all these companies obviously, but in particular those listed on the CSE and Venture Exchanges. Here's another link to an excellent Globe & Mail article that also urges caution:
Good luck
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