Emblem Corp - Over or undervalued? (EMC.V - EMMBF)

That's the central question for any stock isn't it?  Is it under or overvalued.  It doesn't matter whether its an OTC stock trading for a single penny, or a NYSE listed company trading for $100 or more.  

If you get it right you can make money, get it wrong and you lose.  And you can make money both ways.  If you think a stock is under priced you can go long, or if you think the price is too high you can borrow shares and dump them back into the market going short.  

I've written many times on this blog that trying to assign a value to a speculative stock is pretty much a mug's game.  There are stocks out there right now that have been around 20 years or more that have histories of nothing but failure, but their market caps are in the hundreds of millions, sometimes billions. How can that be?  Simple, there are more people buying than there are selling.

Stocks don't trade on fundamentals, they trade on sentiment.  

Emblem is now trading around $4.20 CDN or $3.20 USD.  That is the result of the levels of buy side interest and sell side supply to date.  Determining whether or not the PPS will rise or fall going forward will depend on how many buyers and sellers there are in the days, weeks and months ahead.

I very much like the chances for Emblem to increase in value from current levels, however as a shareholder in the company my opinions should be considered as extremely biased.  Of course I will explain my reasons for being bullish.

Emblem stormed onto the market with trading starting on December 12th 2016.  Activity that first day was robust to say the least, with over 7.3 million shares trading hands on the TSX venture exchange. While market commentators had anticipated an opening PPS of around $1.50 to $2.00 CDN the stock opened at $2.99, double the low end projection.  The PPS closed at $3.30 that first day, and traded as high as $3.98.  There was no trading on the US side as the OTC listing didn't come until later.

Why was there so much interest in Emblem?

It goes almost without saying that Cannabis stocks have been on fire.  But beyond the overall spotlight in the wider marijuana sector, Emblem had already attracted a lot of attention even before being a public company.  There were write ups in Canada's national newspaper The Globe and Mail, Huffington Post did a piece, even the BBC had an article about Emblem.  

If you missed it here's a sampling of some of those early articles.

http://www.theglobeandmail.com/news/national/leadership-behind-canadian-medical-marijuana-company-has-an-oxycontin-past/article33200287/

http://www.cantechletter.com/2016/12/emblem-cannabis-corp-will-soon-one-canadas-leading-producers-says-pi/

http://www.wealthdaily.com/articles/emblem-cannabis-to-be-biggest-cannabis-ipo-of-2016/8445

http://www.huffingtonpost.ca/madaline-zanni/licensed-cannabis-producer-canada_b_12365080.html

http://www.bbc.com/news/world-us-canada-38083737

That's a lot of attention before even one share had traded hands in the public markets.  I myself was alerted to Emblem's IPO by a newsletter service from a promotional outfit called Microcapresearch.  

No wonder demand and volume were so high on day one.  I had set aside funds specifically for EMC, but seeing it open around double the price I was expecting I decided to only invest one third of the money I'd earmarked.  I saw the potential for it to go either way, up or down.  I wanted a position if it kept climbing, but I also wanted some money available if the price moved lower.

As it turned out the PPS moved markedly lower.  Over the first four days of trading on the Venture Exchange short sellers borrowed almost half a million shares and dumped them back into the market. That kind of activity is bound to have a negative impact on the price, and it did.  By the 19th of December the PPS got as low as $2.52 and I was able to add to my position at $2.80 and lower my cost average substantially.

So now the PPS sits over $4 Canadian and the trading has cooled off significantly.  After that first day with over 7.3 million trading the volumes have only topped one million three times.  The last time volume crested the million mark on the Canadian side was on the first day of trading in 2017, January 3rd when a little over 1.1 million shares were bought and sold.  On the U.S. OTC side volumes are even lighter, there hasn't even been a day of 100K trading in calendar 2017 for EMMBF.

Short sellers took their foot off the gas pedal it seems.  After borrowing and dumping 483,200 shares in the first four days of trading up to December 15th 2016, the number actually dropped to 456,000 up to December 31st 2016.  During the first four days of trading the PPS never once dipped below $3 so I think its reasonable to expect that there are some angry bears out there right now.

Short sellers are not stupid, but that doesn't mean they're always right either.  Seeing short selling cool off is a positive sign in my opinion.  If bears had continued raiding the stock and dumping shares it obviously would have impacted the price by making more shares available for sale.  I strongly suspect that there are a lot of eyes on Emblem right now, with many thinking (or hoping) that the PPS will give back some and allow them to buy in cheaper.

Going forward I see the potential for Emblem to attract even more attention.  I haven't seen any promotional outfits hyping the company since that first email I received from Microcapresearch.  But with so much free publicity I don't think the company needs to be doing much to attract attention.

Reddit users may already be aware of a Cannabis Conference coming up at the end of January in British Columbia.  Here's a link to the post on that site:

https://www.reddit.com/r/weedstocks/comments/5m3u59/canaccord_genuity_cannabis_conference_jan_26/?st=ixq972n4&sh=cf90487f

EMC has been able to sustain a price of $4+ CDN on much lighter volume than was experienced when trading first started.  With the above noted conference, in which Emblem's Stewart is named as a keynote speaker, and with Canada due to outline the path forward to the legalization of recreational weed in April I see the potential for this level of demand to at least be sustained with a distinct possibility of it even increasing.

The one caveat I will toss out there is the possibility of a bear raid.  Short sellers could attack Emblem, borrowing more shares and dumping them into the market as they did during the first four days.  It is this possibility that has kept me from investing the final 3rd of the money I'd set aside for Emblem.  If I sense a bear attack aimed at taking the price down I fully intend to take advantage the same way I did with my second buy.

Good luck all....please read the disclaimer at the very bottom of this site and feel free to comment, just no profanity please.  

Emblem Corp - Short interest hits almost 500,000 (EMC.V / EMMBF)

EMC has only been trading for seven calendar days, and the updated figure for short interest is only current up to December 15th 2016, so it includes just four days of trading.  The number current to that date was 483,200 and now with three more days of trading in the books it may very well be higher, and in point of fact I expect that it is higher.  

Regular readers of this miserable and pathetic little blog (I think I might be up to 4 now) know I don't give fundamental data a lot of weight, figuring it to be already 'priced in' to a stock's valuation. The reason is because most fundamental data is typically weeks, and often months old. Short interest on the other hand is much more recent, in this case its only 3 days old.  

Short interest is the one fundamental metric I follow closely because it gets right to the nuts and bolts of the market.  A stock price is determined by the laws of supply and demand, and short sellers artificially increase the available supply by borrowing shares from shareholders and then re-selling them into the market.    

One point I wish to make abundantly clear, short selling is legitimate market activity and I don't view bears as evil or anything of that sort.  Market players can look at a stock and reach the conclusion that, in their opinion, the stock is overvalued.  Expecting the price to fall they can borrow shares from the brokerages of shareholders who have margin accounts and sell them.  The goal is to buy the shares back lower, thus pocketing the difference and booking a gain.  

Longs of course do the opposite, when an investor reaches the determination, in their opinion, that a stock has potential to rise in value, then he or she can purchase shares in the hopes of selling them at some later date for a higher price than what was paid.

Pretty basic stuff.

Naturally it comes down to how many shares are being bought versus how many are being made available for sale, that's what determines the direction of the share price.  And both bulls and bears have the ability to influence the market.  When bulls storm in and buy, if they overwhelm the amount of shares available, then the price rises.  Conversely if bears are making more shares available than buyers are looking to purchase, then the price falls.

Emblem started trading on December 12th, and while market commentators were expecting it to open around $1.50 to $2 per share, instead the level of buy side interest sent the PPS up as high as $3.98 that first day on volume of over 7.3 million shares trading.

Naturally some felt that valuation was inflated, and as should be expected some obviously decided to try and profit by going short.  In just 4 days of trading almost half a million shares were borrowed and sold into the market, and based on the trading its reasonable to expect that most (if not all) of the borrowed shares were sold for more than $3 per.

Now comes the fun part.

As things currently stand short players are sitting on paper gains.  The current PPS is $2.77 and if we assume (pulling a number out of my nether regions) that shorts sold at an average of $3.27 to keep the math easy and rounding up to 500,000 as the short figure....that's a paper gain of $250K.

Not too shabby.

But here's the rub.  In order to turn those paper gains into capital gains short sellers need share holders willing to sell for $2.77 in order for them to cover.  Its the same as a long buying 500,000 of a stock at $2.77 and watching it climb to $3.27.  The long in this case has a paper gain of $250K but he can only turn it into a capital gain if he is able to find buyers willing to pay the higher price.  

Isn't the market fun?

Bears have done well, on paper, but if buying back on the cover causes the PPS to climb its possible that paper gains could turn into paper losses.  Its the same as a long buying a stock at $2.77 and then trying to sell at $3.27, if that selling leads to too much supply and a falling PPS then paper gains could turn into losses.

The thing to understand is that stocks trade on sentiment.  This is important so I'm going to repeat it, stocks trade on sentiment.  A lot of novice retail investors think that there is some magical formula or slide rule to determine whether a stock is under or overvalued.  Good luck with that.  

A lot of investors looked at a company like Tesla and saw its shares trading for $30 or $40 in 2012 and thought it was grossly overvalued.  After all the company was new and had never made a dime in profit, Tesla was bleeding cash to the tune of hundreds of millions per year.  On top of that they were issuing SEC filings saying that their previous filings for earlier years could not be relied upon because of accounting errors.  

Sounds like a short sellers wet dream doesn't it?  Hundreds of millions in losses, dilution on top of dilution, accounting irregularities.  It would be hard to argue with someone presenting the bear case on Tesla back in 2012.  But those fundamental negatives were trumped by bullish sentiment and TSLA took off trading for $100, $200 almost $300 per share in subsequent years.  And now TSLA has finally started to report profits.  Will those profits be enough to sustain the current $200 or so PPS?   That's up to the market to decide, and the primary factor will be sentiment.

But let's get back to Emblem Corp.  Right now its worth $2.77 CDN.  Is that overvalued or undervalued?  

That will depend on market sentiment going forward.  I took out a small long position on the first day of trading, because I saw (and still see) the potential for EMC to attract a lot of buy side interest. I only invested about one third of the capital I had set aside for Emblem however, because I could see it going either way after its incredibly strong opening.  

So far it has moved down from that opening day euphoria, which isn't a shock, but I also saw the potential for increased buy side interest from media mentions and the OTCBB listing, but as of yet that hasn't panned out.  With that being said I am not shying away from my $7 target by April when the Government of Canada is set to announce how its proceeding with the legalization of weed in this country.

Some interesting news has come out as well recently, with the company now authorized to produce Cannabis oils.  Oils derived from Cannabis are said to have a number of positive health benefits, and are an ingredient in some new energy drinks.  I'm invested in one such company and have written about Rocky Mountain High Brand 'Hemp Infused' drinks on here a couple times after opening a position in RMHB at .031 cents USD on the OTCQB.

http://www.avoidthebag.com/2016/10/hemp-infused-beverages-intriguing-idea.html

I am very bullish on EMC as a long term investment, given the management team and the expanding market.  Short term though anything can happen.  If bears continue borrowing shares and selling them the PPS could continue dropping.  

For those concerned with their shares being loaned out there are some things you can do, although personally I don't think it matters much because in my opinion there will still be plenty of shares available in margin accounts.  But shares held in registered accounts for TFSAs and RSPs, those shares are not available to short players.  Additionally putting a sell order in means they can't be loaned out either, although that's something you need to keep an eye on if your intention is to hold for the long term as your PPS could be hit if the stock starts to climb.

Anyway that's enough for now.  Good luck and realize that because of my long position my views are obviously biased.  Verify all information, while I try to ensure the accuracy of what I share I can make no assurances, mistakes can happen.

Cheers

Will Emblem Corp follow Lithium X Energy's trajectory? (EMC.V)

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+?

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.

Beware penny stock Marijuana Pump & Dumps - Learn the art of war

Marijuana hype is bubbling again thanks to a number of U.S. states voting to legalize recreational use and with Canada poised to do the same this coming spring.  No doubt there will be some long term winners, but as with any bubble they'll be few and far between.  And even those that do win, the payoff is not going to be as monstrous as many believe.

Why is everyone so excited?

Marijuana as an illicit industry is worth more than $100 billion in North America, so the thinking goes that growing operations stand to cash in huge thanks to legalization.  

Slow down Cheech, put down the Doritos and think for a minute.  

Pot in Canada alone is expected to become a $10 billion a year industry, but only a small portion of that money will end up in the hands of growers. After the crop is harvested it has to be processed, then it has to be packaged, next comes distribution and then retailing.  Oh, and let's not forget the tax man.

All those expecting Cannabis grow ops to be gold mines, they're going to be disappointed.  Some will be profitable, some.....But they'll have to manage their business well in a highly competitive environment. 

Its a bubble, and as with all bubbles there are a multitude of Penny Stock promotions going on right now trying to cash in on the hype.  Its no different from the Dot Com days when worthless companies put a .com at the end of a word and saw market capitalizations explode beyond anything that could reasonably be supported by financial reality, check Pets.Com for reference.

So how do retail investors get roped into these hyped up plays?

Simple, the professional industry players who prey on greedy retail investors understand something the amateur retail crowd does not.  The pros understand "The Art of War" and the herd doesn't.  On top of that the industry players have tools at their disposal to tilt the playing field heavily in their favor with perfectly legal deceptions that many individual traders don't even know about.

First things first though, understand that the market game is a war.....and everyone is battling over the same objective, money.  "The Art of War" was written about 2,500 years ago by Sun Tzu, a Chinese military leader, and the precepts he laid out in the 5th century BCE are still true today.  They have been applied to arenas beyond the battlefield, into the business world and of course the public equity markets.

Sun Tzu taught that the key to war is deception, and he set out a number of rules, including these:

• When you are weak you must appear strong
• When you are strong you must appear weak
• When your force is far away they must appear to be close
• When your force is close they must appear to be far away

I think readers will get the point.  These rules can be transferred to the stock market quite simply and broken down in to two key points that the Smart Money industry players know very well.

• When wanting to sell you must appear to be wanting to buy
• When wanting to buy you must appear to be wanting to sell

Alright, now for another key concept that has to be understood when it comes to warfare, and that is to know your enemy.  Let's look at things from the perspective of a penny stock company engaged in growing marijuana and looking to cash in on all the hype by getting investors excited and buying their stock.

Firstly you need to be publicly traded, and that can be a lengthy and difficult process.  You have to satisfy regulators that you have a potentially viable business and there are significant costs involved in an Initial Purchase Offering.  If you seriously believe your company is going to have a shot at being a long term success, then this might be the best option.  On the other hand if all you're looking to do is cash in on some hype, it would be easier to avoid all the scrutiny and expense by going public via a reverse merger with a publicly traded shell.  

If you don't understand that, then do some research and get reading.  

Companies that enter the market via a reverse merger into an empty shell company, you're likely going to have a stock trading at somewhere around one single penny because an empty shell has no business.  Now that has changed, so informing some investors who are willing to risk some capital should get some trading happening and get the share price up, maybe to a nickel or so.  That jump from empty shell trading around one penny to an operating business trading around a nickel will likely attract some attention, it won't take much to get the PPS up to maybe 10 or 15 cents.

Now we're ready for some fun.  Still with me?

Now you need some attention, you need retail investors to at least put your company's ticker symbol onto a watch list.  For Cannabis/Marijuana companies there are a number of newsletter services and promotional outfits that will get the word out.  It'll cost some money, maybe $10 grand or so for each outfit you hire, but if things work out a big pay day is coming, ya gotta spend money to make money after all.  Besides, if the promoters like the potential some will take payment in stock.

Okay, so now you're pretty much set.  You have your shares ready to sell, just pulling a number out of my nether regions we'll say you and your associates have 50,000,000 shares ready to be sold. Shares you've issued to yourself as compensation, those you picked up cheap after the reverse merger before the market woke up, others via warrant exercises and such.

Now all that is needed is some professional industry types to sell them.  Your job will be to issue some news, something that sounds really good.  You don't have to lie, you just have to be well schooled in the art that is called hyperbole.  For those who don't know the meaning of hyperbole, basically its meaningless words that are made to seem meaningful.  

Still don't know what I'm talking about?  Okay, I will give you an example:

Bogus Marijuana Industries Makes Key Acquisition

Upper Boot Lick Ontario, (Made Up Newswire) December 2nd 2016 -- Bogus Marijuana Industries (SPLFF) an emerging entrant into the Marijuana Growing Industry today announced the acquisition of a new property as the company expands its operations in the exciting Cannabis market.  

Bogus Marijuana has acquired 100 acres of land in Doobie Township British Columbia which it intends to cultivate into its flagship operation as the company seeks to become a major supplier of both medical and recreational marijuana.

Bogus CEO Jay Rolling commented:  "This is a major accomplishment for the company, with Canada and numerous states either legalizing recreational use or soon to be doing so we know this will be an incredibly lucrative market, and with the acquisition of this property Bogus Marijuana is positioned very well with excellent prospects for significant growth".  

Marijuana for medical and recreational use is forecast by experts to be a $100 billion dollar industry in North America in the coming years, with some even suggesting a figure almost double that within the next decade.  For further information on Bogus Marijuana please visit the company's website or contact Investor Relations at IR@bmipot.com

We seek Safe Harbor

Sounds good doesn't it?  

• Lucrative market  
• Excellent prospects
• Well positioned
• Significant growth

Yes, it sounds good, but its all meaningless....its just hyperbole.  Safe Harbor isn't a fishing village in Maine.  It means that forward looking statements are just that, forward looking and they can't be relied upon.  If the excellent prospects don't work out, oh well, if it turns out their position ends up being dead last investors can't complain.  If significant growth means they go from $50,000 in revenue for the first quarter to $50,005 in the second quarter, too bad so sad.  Some other words to look out for are: plans, measurable, synergy, dynamic....there are far too many to list all of them.

Still reading?  Good, because this is where the real fun starts.  

First let's recap and consider some of the costs.  

The reverse merger (also called a reverse takeover or RTO) into the empty shell would cost around $1 million.  The promoters we'll peg at a generous $50,000 and we'll toss in another $50,000 for general expenses.  Then there's the land acquisition which we'll peg at $5 million, but it can be heavily mortgaged and can later be sold.  

That's a lot of cash, over $6 million, but with the land bought using leverage you're only out around $1.1 million.  You know the old saying, it takes money to make money.  

And what's the pay off?  Those shares that were 1 cent when the RTO took place are now trading around 15 cents we'll say.  And the 50,000,000 you've hired a broker to unload, if they're sold at an average of  25 cents, they will be worth $12,500,000 in cash.  If the stock gets pumped up to 50 cents, then double that to $25 million.  

Great, but if they're going to be sold at an average of 25 cents, then there need to be buyers willing to pay that price.  And this is where having a professional broker comes into play, hopefully you have a good one and he'll be able to maximize your profits, it could be a her but chances are its a guy. You might hire more than one.

The promoters have attracted investors, you've put the news out, everything is set.  Some social media posting on stock message boards, FaceBook, Twitter etc would be good to have right now too. And maybe the professional broker you hired will put a big order on the bid side through a number of different trading houses, maybe 5,000 lots we'll say....that's 5,000,000 shares worth of buy side interest.  Given that you and perhaps some of your friends or associates own most of the available shares the broker isn't going to have to worry about too many shares hitting the bid, and if they do....who cares.

Now the sheep are watching, the pumpers are pumping, the Level II quotes are being shared and it looks like there is huge buy side interest in Bogus Marijuana.  Not many shares are made available on the ask side and the PPS starts climbing fast.  15 cents, 16 cents, 18, 20, 25, 30.  The herd goes full retard, falling over themselves to get as many shares in this "no brainer" sure fire winner. 

• Remember "The Art of War".  When the pro is selling he makes the sheep believe he is buying. There might even be some pre-market activity to get people thinking that "something is up,  someone knows something".   

But wait!!!  When those shares show up on the ask, that's going to alert the herd that there's some heavy dumping in store, right?  Wrong.  Not if the broker uses an iceberg order.  When the stock hits 20 cents he can have 10 lots showing as "the tip" of the iceberg, the retail herd will see that. But he can have another 1,000 lots hidden "underwater" so to speak, the unseen and largest part of the ice berg. And he can do that right up though 25 cents, whatever the market will handle.  

The stock trades millions, maybe tens of millions of shares in a single day.  All the shares don't have to be sold on the way up either, some retail players know the game and will start booking profits themselves.  When too much selling hits its time to close the bag, dump a large number and bring the PPS down closing the bag.  Some retailers will average down, convinced Bogus is a winning company and that dark market forces are messing with the share price.  And they are, but now its too late.  

And when its all done and the 50,000,000 shares have moved out of smart money hands and into dumb money retail hands, the game is basically over.  The biggest losers will be those who ride a pump all the way down.  $12,500,000 generated from selling at an average of 25 cents, that cash should be enough to last at least a couple years.  It'll cover the mortgage payments on the 100 acres of farm land and fund business operations.  The company will have a phone line, a web site, maybe an office in one of those shared business operations or a mailbox with an actual street address.  

Its a dirty game, and before you play you should learn the rules the professionals use. The game requires people with more money than brains and lots and lots of greed, and those things are never in short supply.  Most people won't read this miserable and pathetic little blog so the machine will go on grinding away.

NOW PLEASE TAKE NOTE

This is a blog, an opinion piece.  Take nothing I have written here for granted.  If you haven't developed at least a bit of a cynical nature, then start right now with what I've shared here.  Research what I've written about, google things like Ice Berg order and stock promotion.  

Ultimately each person is responsible for their own decisions.  I hope this helps make you a better investor or trader, good luck.   Oh, and if you want to share this blog posting, by all means please do....FaceBook, Twitter, on message boards, its all good.  I have been accused of being an attention whore, and the only answer I can give to that is "mea culpa", guilty as charged.

Cheers

Message board fun and games with Cannabis plays like New Age Farms

Banter on stock message boards can be fun.  On occasion you might stumble on someone sharing some useful information, but by and large it typically degenerates into a penis waving contest between those pumping the positives and others who bash based on the negatives.  I am prone to do both, with different stocks of course.  

New Age Farms trades in Canada on the Canadian Securities Exchange (CSE) under the symbol NF and in the U.S. on the OTCBB with the symbol NWGFF.  The company came onto my radar the same way many penny stocks do, via a promotional email blast from some outfit that calls itself Daily Stock Reporter.  

The email itself is pretty much standard boiler plate for penny stock promotion, with the typical hyperbole you would expect:  "There's no telling how big of a run this could have....".  If you look closely at the small font print at the bottom of the email it discloses payment of $12,500 in cash. There's also a link to a "Full Report":  http://egmprofiles.com/NWGFF.pdf

If you bother to go onto that site you'll see the disclaimer again at the bottom, and if you click the word disclaimer it takes you to this EGM's disclaimer page.  I have to admit that I love the honesty and candor, they basically say "this is a pump".  Here's a cut and paste of some of what it says.

What will happen when the Campaign ends?

Most, if not, all of the Profiled Issuers are penny stocks that are illiquid and whose securities are subject to wide variations in trading price and volume. During the Campaign the trading volume and price of the securities of each Profile Issuer will likely increase significantly. When the Campaign ends, the volume and price of the Profiled Issuer will likely decrease dramatically. As a result, investors who purchase during the Campaign and hold shares of the Profiled Issuer when the Campaign ends will likely lose most, if not, all of their investment.

Why do we publish only favorable Information?

We only publish favorable information because we are compensated to only publish favorable information.

Why don’t we publish negative information?

We don’t publish negative information because we are not paid to publish negative information. We are paid to publish only favorable information.

Is the Information complete, accurate, truthful or reliable?

The Information is a snapshot that provides only positive information about the Profiled Issuers. The Information consists of only positive content. We do not and will not publish any negative information about the Profiled Issuers; accordingly, investors should consider the Information to be one sided and not balanced, complete, accurate, truthful or reliable.

What we do not do.

We do not publish negative information about the Profiled Issuers. We do not verify or confirm any portion of the Information. We do not conduct any due diligence or research any aspect of the Information including the completeness, accuracy, truthfulness or reliability of the Information. We do not review the Profiled Issuers’ financial condition, operations, business model, management or risks involved in the Profiled Issuer’s business or an investment in a Profiled Issuer’s securities.

Its hard to argue with that disclosure, its pretty bang on the money and brutally honest.  If you want to read the whole thing here's the link:  http://www.egmfirm.com/disclaimer/

I shared that information on Stockhouse.ca, my user ID is ledrog and I've been on that site since 2001. As you might expect I was attacked by the bulls as a short, accused of using multiple IDs, and of engaging in manipulation so that I could load up "cheap".  I find that funny since it wasn't long ago that NF was trading around 2 or 3 cents, so I hardly think anything over 10 cents is "cheap".  

Full disclosure, I have no position in NF long or short and no intention of initiating one at any time in the future.  

Okay.....so the bulls say:  What of it?  Read the news, this is a great company.....gonna be huge, great business plan, yadda yadda yadda.  Yeah yeah, I've heard it all before.

These emails are aimed at the lowest common denominator in my opinion, people with more money than brains.  I'm talking about people who think "Safe Harbour" is a small town in Newfoundland. Its "Forward Looking Language" we're talking about here.  Anything that says we: expect, anticipate, plan or similar type language.  It sounds great, but these are not material statements of fact.  Plans don't always work out, expectations are often not met, things that are anticipated sometimes never come to pass.

Regular readers know I'm not big on fundamentals, especially with highly speculative stocks.  The point I keep trying to drive home is that if you want to make money with penny stocks, your best chance is with companies that are lightly traded, because the sheep haven't been called to the dinner table yet.  

The risk you take buying when things are quiet is that the herd will never show up.  That the promotion, news and hype that gets the great unwashed all excited, greedy and buying high, that it won't happen.  In my view that's still better than storming into a stock that's already climbed from 1 or 2 cents to 20 or 30 cents for gains of 1,000% or more.

I'd love to post a chart of NF, but charting sites are few and far between for CSE listed stocks. The CSE has the easiest listing standards in Canada, I liken the CSE to the U.S. OTC non-reporting Pink Sheets, sometimes called the Gray Market.

Cannabis stocks are popping up all over the place, and I fully expect to get more emails on others, especially for those listed on the CSE and Pinks.  I have taken a couple of flyers myself and if one of the companies I hold starts getting pumped and promoted in this fashion, I'm sure you can guess what I'll be doing.

Good luck

MyDx - Another way to play the marijuana space

This blog is starting to generate some emails, nothing huge, one or two a week.  Last Wednesday Zane wrote and asked me if I'd consider looking into a company called MyDx Inc that trades OTCQB under the appropriate symbol MYDX.OB.  They have created a hand held analyzer that detects chemicals in, you guessed it, Mary Jane. as well as food, water and even air.  It can work in tandem with a smart phone and a downloadable free application.  

I've already written about another interesting Cannabis play in Rocky Mountain High Brands (RMHB.OB) and their Hemp Infused energy drinks, so I figured.....what the hay.  Or perhaps:  "What the hemp" might be a better way of putting it.

Cannabis, Hemp, Marijuana, call it what you want, the sector is getting a lot of...uhm, Buzz.  With California voting in favour of legislation and Canada poised to do the same at the federal level this spring it stands to reason that public companies in this space are going to be attracting a lot of attention.

I'm not going to go in depth on the fundamentals here, regular readers already know my opinion.  I consider all fundamental data to be at least weeks and often times months old. Hence in my view its already "baked" into the share price.  Okay okay, I'll slow down on the Wacky Tabacky quips....they're hard to resist.

MYDX closed this past Friday at .022 cents American, trading on the OTCQB as opposed to the non reporting Pink Sheets which I will not touch.  As of  October 12th of this year there were 150.5 million shares outstanding, giving the company a Market Cap of about $3.3 million.  

There is some promotion going on, which as I've often pointed out is to be expected with development stage companies.  They're profiled at CFN Media Group, a website that specializes in promoting the overall Cannabis space.

http://www.cannabisfn.com/mdc/mydx-inc/

They haven't been around for a long time, with the chart showing trading starting in April of 2015 in the $2 to $3 range.  That's quite a drop, all the way down to just a couple of pennies.  You can see for yourself here:

Two things pop out.  One obviously is the big drop in the PPS, and the second is the explosion of volume starting in September and carrying through to the present.  

According to news released by the company, their application was the number one downloaded free App in IOS App Store in the medical category:

http://finance.yahoo.com/news/mydx-one-app-rockets-top-141100654.html

There's another reason however why I think volume has exploded, and that reason is short selling. As might be expected with a stock trading for less than one single nickel, short interest has been very low....until recently that is.  Up until September the reported numbers of shares borrowed and sold into the market was only a few thousand, forty odd thousand as recently as July.

And then it shot up to almost 200K at the end of August and then to a high of over 2 million as recently as September 30th.  The most recent update has short interest just shy of 1 million current up to Oct. 15th.  So short interest shot up in tandem with the explosion in trading volumes in other words.

That suggests to me that MYDX is now fully "in play".  In my opinion this stock has attracted the attention of the real players, and as such I expect there to be a lot of volatility.  High frequency traders scalping large quantities for small % gains, retail investors buying and holding, penny flipping types riding momentum on swing trades.  And given the minuscule market cap, it strikes me that there is a lot of upside potential here.  

Now full disclosure.  As I write this I have no position in MYDX whatsoever, and as it says at the very bottom of this blog, I have not and will not ever accept payment in any form to write about any stock. With that being said I may very well open up a position in this company, perhaps within the next 48 hours.  

Do note that penny stocks are incredibly high risk investment vehicles.  It is quite possible that one may lose some or all of their investment when buying OTC stocks, so please take special care here. My regular readers know my favourite saying: "Nobody ever went broke by taking profits".  In my view stocks like MYDX are only suitable for risk capital, that is to say money that one can afford to lose.  

Please do your own DD and research and examine your own objectives, be they long term, short term or somewhere in between.  And good luck.  

Canada poised to open up a $10 billion industry this spring

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:

http://thenewswire.ca/archives?tnwcatalyst2=release_id%3D19667

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.

http://marijuanaindex.com/stock-quotes/marijuana-index-canada/

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:  

http://www.theglobeandmail.com/report-on-business/rob-commentary/investors-should-take-a-deep-breath-before-they-try-cannabis/article27059802/

Good luck