Equities continued to surge higher and recoup the recent weakness. Keep in mind that just a few days ago, the market was off to its worst start to a calendar year ever. Good reminder of how things can turn around on a dime. The S&P 500 has moved back into the green for the year, with a strong rally of 1.78% to 2,062.
Cannabis stocks rallied more than the broader equity markets, mostly lead by strength in GW Pharmaceuticals. For better or worse, the press releases are increasing in volume as the year gets underway. The MJIC Marijuana Index and Benzinga 420 Marijuana Index rallied 6.84% and 6%, respectively.
Daily Negative: Blue Line Protection Group (OTCQB: BLPG) put out a press release to tout its recent media coverage. This company has failed to capture market interest, and its press release is redundant.
As investors in the cannabis space, we are mostly relegated to the OTC markets for the time being. As noted, there are many challenges in this marketplace. However, it seems prudent to point out the importance of understanding the role of volume and bid/ask spreads. When volume is low, the difference between what you buy a stock at versus what you sell it at can sometimes be several percentage points apart.
For example, we spoke of BLPG above. At one point during the day, an investor would pay 0.2399 to buy and 0.2301 to sell, which is a a 4% spread. For comparison, let’s take a look at Apple, which has a spread of less than one tenth of 1 percent for a spread. Obviously, Apple trades on a listed exchange and has much higher volume, which contributes to this situation. We just want to point out that liquidity impacts pricing and to make sure you are cognizant when looking at this young, growing sector.