Once again, marijuana stocks have taken over the TSX Venture. For many junior investors this has to feel like deja vu as this is the second time in two years marijuana stocks have gone on an epic rally. The last time marijuana stocks in the U.S. and Canada soared to unimaginable heights was between January and March of 2014.
Trudeau’s impact on Marijuana Stocks: liquidity surge in Canada’s small cap sector
We released articles during this period with titles such as Are Marijuana Stocks the Next Bubble? andThe Rise of Legal Marijuana: Marijuana Stocks Rally on Expanding $2.34 Billion industry. Unfortunately, as is the case with any mania or short term bubble, many junior marijuana companieswere overvalued and failed to produce results. Many, were just taken down with the overall markets as interest faded and liquidity in the TSX Venture continued to decline. However, this all changed on October 19th, when Trudeau and his Liberals won a majority in Canada’s National Election.
Marijuana stocks bubble 2.0
It has been almost two years since the last bubble in marijuana stocks began; and, more recently, the action has been primarily in the Canadian small-cap sector.
The issue is still making headlines in the US as Ohio will vote today to decide if it will become the U.S. Midwestern state to legalize the recreational use of marijuana.
What’s different about the run up in marijuana stocks today is this: in the past 12-18 month period, since this sector was last in vogue, the vast majority of marijuana stocks on Canadian small-cap exchanges have either declined precipitously, or been met with a choice to delist. So, prior to the National Election on October 19th, many of the pretenders have faded away. A handful of companies, most with real business plans in place remain. In light of this, investors in Canada have even fewer top-tier marijuana stocks with production facilities and license approvals in hand to choose from. This has led to a rush of capital into a select few marijuana stocks in Canada, which I will document shortly.
Trudea benefits Marijuana Stocks
All eyes will be on Trudeau this Wednesday as he prepares to name his cabinet ministers. In an article titled Bagnall: Why marijuana’s momentum seems unstoppable the decision is explained:
“Just how serious the Liberals’ pledge to put Canada in the vanguard of marijuana law reform is should become evident Wednesday when Trudeau unveils his cabinet. The key members on this file – aside from the prime minister himself – will be the ministers of health and justice.”
Click here to read the entire article.
Below is a heading from last week’s newsletter:
“Canada’s Tech, Marijuana and Infrastructure Industry to Boom under Trudeau
The second industry winner this election, as it relates to the TSX Venture and some of the leading stories in Canada’s small cap space, is the marijuana sector. Trudeau has vowed to legalize the drug.”
Below is a further excerpt highlighting our stance on marijuana stocks:
Before Trudeau won a majority government, the Liberals stated,
“…To ensure that we keep marijuana out of the hands of children, and the profits out of the hands of criminals, we will legalize, regulate and restrict access to marijuana.
We will remove marijuana consumption and incidental possession from the criminal code, and create new, stronger laws to punish more severely those who provide it to minors, those who operate a motor vehicle while under its influence, and those who sell it outside of the new regulatory framework.”
Click here to read the entire report titled Trudeau Bets $1 Billion on this Sector.
In our latest EBook we reveal 50 leaders who took small-cap stocks to stunning multimillion dollar buyouts. The companies these leaders run today are also described in this one of a kind rolodex of some of the top entrepreneurs and business minds, operating in North America’s small cap public markets.
Four Canadian Marijuana Stocks feeling Trudeau Mania
A handful of Canadian marijuana stocks have a new meaning for Trudeau Mania and are believing in Justin like never before.
Aphria Inc. (APH:TSXV) is the latest Venture deal to see its market cap rip higher on elevated volume. Aphria hit a low of $0.91 per share on October 19th and a high of $1.43 today. Its stock has traded more than 5 million shares in the past 11 trading days.
OrganiGram Holdings (OGI:TSXV) is an issuer we’ve written about numerous times and has received increased interest due to the fact it aims to produce organically harvested marijuana. Its shares hit a low of$0.415 on October 19th and has more than doubled to a high of $1.01 today.
OrganiGram hit a low of $0.195 per share as recently as October 7th. Its shares were up 5 fold from that low to today’s high.
Maple Leaf Green World (MGW:TSXV) is an example of a previously unknown small-cap stock that has caught a huge bid in recent sessions. Maple Leaf traded about 39,000 shares at $0.04 on October 19th. The next day it traded a whopping 1.7 million shares and closed up to $0.06 per share. Today its shares were up 12.5% to a new high of $0.10 per share on 2.5 million shares traded.
On October 27th, Maple Leaf reported:
“The Company applied for a MMPR license in August 2014 and is currently at stage 2 of the application process. Maple Leaf has been providing supplementary information in response to questions from Health Canada on an ongoing basis for the past 12 months.”
Click here to read the entire press release.
Canopy Growth Corporation (CGC:TSXV) was up 7% to $3.11 in afternoon trading Tuesday on 2.7 million shares traded.
On October 23rd, I published an article titled The Future of Marijuana stocks in Canada. Below is an excerpt on Canopy Growth:
“Canopy Growth, who’s wholly owned subsidiaries consist of: Tweed Inc., Tweed Farms Inc., and Bedrocan Cannabis Corp. was Canada’s first publicly traded medical marijuana company. Being first to market has its benefits, particularly when you can also boast being the first geographically diversified producer with dual licenses under the Marihuana for Medical Purposes Regulations.”
Click here to read more from the Future of Marijuana Stocks in Canada.
Canopy Growth is up over 50% since hitting a low of $2.10 per share on October 19th and $1.99 on October 20th. Its shares hit a high of $3.23 this morning.
All of these company stock charts look the same over the past month: 45 degrees heading straight up to the right.
Interest in marijuana stocks throughout Canada’s small-cap sector has piqued more than a few investors interest as can be seen in rising volume and share prices of the issuers mentioned. This is also a sign that the investor is hungry for liquidity and ensured development.
Marijuana stocks are the place to be in Canada’s small-cap sector currently, but, like all sectors interest or heightened volume does not last. Valuations are currently adjusting due to the assumption the Liberals will work to quickly legalize recreational marijuana use. Any disruption or delay to this end, may cause a short term sell-off in marijuana stocks.
This article represents solely the opinions of Alexander Smith. Alexander Smith is not an investment advisor and any reference to specific securities in the list referred to in the article does not constitute a recommendation thereof. Readers are encouraged to consult their investment advisors prior to making any investment decisions. The information in this article is of an impersonal nature and should not be construed as individualized advice or investment recommendations.
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