Tuesday Biotech Versus Cannabis

biotech

U.S. Q3 GDP revisions came out today and the news was quite positive. The good old U.S. economy posted a 5% annualized growth rate. Investors cheered as the Dow Jones Industrial Average eclipsed the psychological 18k today. The S&P 500 posted a gain of 0.17% to 2,082.

Cannabis investors are not feeling the holiday cheer. It appears that the latter half of last week’s advance has stalled out. Selling pressures were present again today as MJIC Marijuana Index and Benzinga 420 Marijuana Index declined by 7.14% and 1.8%, respectively.

Daily Positive: “It is tenderness for the past, courage for the present, hope for the future. It is a fervent wish that every cup may overflow with blessings rich and eternal, and that every path may lead to peace.” – Agnes M. Pharo

Daily Negative: Last night, mCig released its 10Q filing. The results were very underwhelming and investors headed to the exits en masse. The stock suffered considerably today on high volume with a decline of 18.29%.

GW Pharmaceuticals (GWPH) is a cannabis bellwether stock. However, its market movements correlate much closer to biotech than cannabis. For better or worse, this correlation will likely rise further now that GWPH is a part of the NASDAQ Biotech index. Interested investors can follow this relationship closely using the iShares NASDAQ Biotech ETF, IBB.

Exchange Traded Funds, ETFs, have become core instruments for institutional and retail investors. Their usage ranges from day trading to long term investing. However, ebbs and flows of ETFs will impact the underlying holdings despite the fundamentals of the companies in the ETF. Therefore, GWPH’s individual progress will likely be more muted by larger biotech trends given its inclusion in the index. Biotechs have had a tremendous run for the last several years and many analysts are starting to express caution given the sector’s progress and current valuations.

 

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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