Listless Monday

Listless

Holiday weeks are generally quiet and this week began no differently. U.S. stocks jumped higher out of the gate following strength abroad. Similar to Friday, the gains quickly faded as investors failed to support initial strength. Remember, waning liquidity leads to potentially greater price fluctuations. For the day, the S&P 500 finished up by 0.27% to 2,069.

The way volumes are dropping, investors and traders must be wondering what the next catalyst will be for cannabis stocks. In the meantime, cannabis indices appear to be a listless ship in the capital ocean: MJIC Marijuana Index down 1.58% and Benzinga 420 Marijuana Index down by 1.2%.

Daily Positive: NHLE appears to be very pumpy with press releases using such language as: intention, considering, seeking, which are worthless, pumpy press releases. It is a positive to see the stock down by 6%, despite their best efforts to pump up their stock with these meaningless statements.

Daily Negative: Is anyone out there? Hello? We know the end of the year is full of holiday and shopping activity. However, we would like to see more action around quality names.

Investors should beware of the way they gain information about companies. We have watched the misuse of press releases and social media for quite some time. These are good to review to know what the companies are putting out there. However, the research does not stop there. Paid promotion is tricky, as it is typically fluff and it is unlikely that it will tell the whole story. Public companies are supposed to be transparent and there is a lot you can learn about their revenues and management teams from their filed updates, such as their quarterly reports known as a 10Q.

For some reason, even when companies post solid revenues that are meeting or exceeding their projects, this market doesn’t respond in kind. Yet, we see activity off of an uptick in tweets, Facebook posts or pumpy press releases. This makes us nervous for the day traders out there.

One of the fundamental flaws of the OTC markets is its high degree of manipulation through social media and press. This is not entirely specific to the cannabis sector. However, please take the time to do the background work to understand a company or work with professionals who know how to navigate and do the work. It is our goal to see the industry improve; investing in the best companies who will last is the only way this will happen.

 

The discussion above is provided for informational purposes only and does not constitute an offer of, or solicitation for, any investment services or products offered by the author. The author is not making any investment recommendations and the opinions above do not constitute investment advice. Reference to above indices [and companies] is based on information provided by sources the author believes to be credible. Investing in the cannabis industry, as with other industries, presents certain risks including the risk of loss on an investment.

Morgan is a Founding Partner and Managing Director of Poseidon Asset Management. He is the Chief Investor of their Cannabis Focused Fund. Morgan previously worked for a privately owned Registered Investment Adviser and earlier was at UBS Financial Services focusing on wealth management. Morgan believes in the potential of the cannabis industry and likes having an active involvement as it develops. You can follow him on Twitter @PoseidonAsset.

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