What does a Junior Lithium mining company have to do with a producer of Medical Marijuana?
Generally speaking, practically nothing. But when it comes to comparing shares of LIX.V with shares of EMC.V I think the similarities will show up in the weeks and months ahead.
In educational circles its called applied learning, taking knowledge acquired from one area and applying it to another. In this case I'm taking the lesson of the surge in Lithium Stocks and applying it to the MMPR space. Specifically I'm taking what I learned about the trading in LIX.V and postulating that it may very well serve as a guide about what to expect for trading in EMC.V.
Lithium X started trading on November 30th 2015 and opened at 30 cents per share. After forming a solid base around 40 cents and trading in that area until mid January the PPS took off. By April of 2015, just 4 months after opening at 30 cents, the PPS was trading over $2.50
Oh to have a time machine eh! Here's a chart that covers that first five and a half months of trading in LIX.V
I didn't jump into LIX.V because I thought the Lithium buzz was pretty much done. I banked some very nice profits on Lithium stocks like Nemaska, Lithium Americas and even Durango, but I stayed away from LIX.V because at that time they looked, (to me) to be getting too much promotion and all the hype that goes along with it.
Live and learn. Investors loved the Lithium X story and in particular the history of their management team.
The lithium buzz in general and the Lithium X story in particular, was too hard to resist and LIX.V took off. Stocks, as I have often written here, are more about psychology than anything fundamental. If I could go back and invest in LIX.V for 40 cents I would, obviously.
But wait. Maybe I do have a chance to do it over again. But instead of with a Jr Lithium miner I can do it with a newly minted Medical Marijuana company, Emblem Corp, which just started trading under the symbol EMC.V
A big part of the reason Lithium X Energy took off in my opinion was because investor's liked the track record of their management team, which had (and has) a wealth of experience in the mining sector. Executives whose histories include established and successful companies like Potash One and Albemarle obviously give a level of comfort.
Emerald has a similar narrative with their executive team.
Notably John Stewart, who used to run Purdue Pharma, the privately held pharmaceutical giant best known for pain medications like OxyContin. And Harvey Shapiro a former CEO of Dynacare Inc which was acquired by Laboratory Corp of America Holdings in 2002.
Like the Lithium buzz that sent many Jr Miners soaring with gains of several hundred percent and sometime over 1,000%, medical marijuana is equally hot right now. And I believe that Emblem may very well be coming to the market at an incredibly opportune time, just as LIX.V did in November of 2015.
In fact the timing may be even better. Not only is the MMPR space hot right now, but the overall markets have been in full bull mode since the U.S. presidential election.
Shares of EMC.V were expected to open somewhere around $1.50 but when I finally was able to pull up a quote this morning the PPS was already up around $3. And while I think that price is reasonable and has a lot of upside potential, with the hype surrounding MMPR in general and EMC.V in particular, I have decided to hold off in anticipation of some volatility.
Why do I think there's a lot more upside, even at $3+?
Why do I think there's a lot more upside, even at $3+?
Sticking with Lithium X Energy as my point of comparison, I think Emblem can attract even more attention because of all the news around Marijuana right now. Yes Lithium got some attention in the media, but nothing compared to all the stories coming out about legalization right now. And I think Emblem's path to revenues and profitability could be much shorter.
Lithium X Energy, over a year after going public, is still in the development stage, they haven't yet reached production. In fact they still haven't published a feasibility study on their proposed mine in Argentina. I'm not pointing that out to be negative, its merely a fact of the mining game, it takes years to bring a proposed mine to production, and many fail. That hasn't stopped Lithium X from raising capital however as investors continue to believe in the company as evidenced by their market capitalization of roughly $130 million Canadian.
Emblem by contrast already has their license form Health Canada and was recently written about by Huffngton Post Canada:
An Inside Look At One Of Canada's New Licensed Cannabis Producers
Add in the fact that the rules around legalization for recreational use are expected in Canada this spring and I believe there is a recipe here for what may turn out to be a perfect storm.
I could write reams and reams more on the reasons for my bullish opinion and why I'm looking to take out a long position, but I'll leave readers to do their own research and further due diligence if they're sufficiently intrigued.
I will note that Emblem hit my radar via a promotional email, the same type of promotion that caused me to stay away from Lithium X Energy. Again, live and learn. Some promotion with development stage companies is to be expected of course, and I will be watching to see if Emblem "jumps the shark" in my estimation by going overboard.
Despite my bullish opinion please understand there are always risks, and as someone looking at taking out a long position my opinions are obviously biased. Small and microcap companies fall into that high risk category and are not suitable vehicles for everyone, there is every possibility that investors could lose some or all of the money they put at risk. I strongly advise consulting with an investment professional to determine if EMC.V is suitable considering both investment objectives and tolerance for risk.
Comments are always welcome and good luck.
Started a position....
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