Stocks are likely to post much bigger gains when the possibility of something (e.g., a law change, a merger or acquisition, etc.) first becomes known. Once the event actually happens, many investors have already moved on or may even be looking to take some gains (sell off the stocks they bought in advance of or right as a rumor came out). Three new indices show this very thing.
Cannabis investing is easily the most exciting and most potentially lucrative industry out there today. That doesn’t mean you can just throw your money in any stock at any time and come out a winner.
It’s not quite that easy to make the biggest fortune of your life.
When you do find the right companies to invest in – and the National Institute for Cannabis Investors is here to do just that – the timing of your buy is critical.
Sometimes the best time to buy is right before quarterly earnings – that’s if you (or your go-to analyst) is confident the company is going to beat predictions from “the Street” or if a major announcement is brewing.
At other times, a stock can just be perpetually undervalued, even at a time when it’s gone up in price, and you want to get in before a true surge happens.
There’s also the ability to use volatility as your friend. Every sector in investing history has its ups and downs. The cannabis companies just regularly rebound faster and with bigger gains than other industries worth following. So when stocks go down, you have to see it as a potential buying opportunity on the way to building a solid cannabis stock portfolio.
The latter can prove to be a lucrative strategy if you believe in a company’s plan, products, and leadership. That’s because the important thing to remember along the way with cannabis is that the outlook for this industry in the medium term and long term is unchanged: it’s massive.
But when you’re making a trade, you need to be aware of the direction in which the whole industry or a segment thereof is moving at the time. Trading with metrics in mind is almost always a winning strategy.
These are three metrics I think every cannabis investors, from novice to experts who’ve made millions already, should be watching every trading day…
Every Cannabis Investor Needs the Best Data
When we formed this Institute, one of our first goals was to pick the perfect indices to track the cannabis stocks trading publicly on the New York Stock Exchange, Nasdaq, Toronto Stock Exchange, Canadian Securities Exchange, and on U.S. over-the-counter (OTC) markets
My research team and I realized that we needed to build our own from the studs up.
So, we got to work. What we came up with was a trio of indices exclusively for member of Cannabis Profits Daily:
- The NICI 50 Cannabis Index is an equally weighted, daily rebalanced, local currency index of the largest global stocks in the cannabis business. To be included in the index, a company must have more than half of their revenues from a cannabis-related business or be redirecting a substantial portion of its strategy and capital towards cannabis-related business. If a company is pre-revenue, then a major portion of its efforts must be dedicated to cannabis-related products. If a company does not “touch the plant,” then half of its revenues must come from cannabis-related products, including “lifestyle” products such as accessories, apparel, and the like. The index is reconstituted quarterly to include the largest 50 publicly traded firms by market capitalization. Market capitalization is based on NICI’s estimate of the company’s fully-diluted share count and closing prices five trading days prior to the end of the quarter.
- The NICI U.S. Cannabis Index is an equally weighted, daily rebalanced, local currency index of the largest and most liquid stocks in the cannabis business. To be included in the index, a company must be primarily focused on the U.S. cannabis market. The index is reconstituted quarterly to include the most significant and liquid U.S. cannabis stocks based on NICI’s evaluation.
- The NICI Wellness Index is an equally weighted, daily rebalanced, local currency index of the largest and most liquid health and wellness related stocks in the cannabis business. To be included in the index, a company must be primarily focused on deriving pharmaceuticals or health related products from cannabis or designing products for the endocannabinoid system. The index is reconstituted quarterly to include the most significant and liquid health and wellness cannabis stocks based on NICI’s evaluation.
You could have the most powerful cannabis-investing tool at your fingertips. Our one-of-a-kind stock database, what we at the Institute like to call “The Vault,” contains our highly secured database of cannabis companies. In fact, it is easily the most comprehensive database of cannabis companies on the planet. And if you click here, you can access this vault for yourself to help you find more winners… and giving you the potential to make more money, faster.
You can find each index on NICI’s webpage (NICinvestors.com) any day, any time – It’s right at the bottom of the page. You will be able to see whether the indices are up or down for any trading day.
The data for each index go back to the close of trading on June 29, the last trading day of 2018’s second quarter, when we started at a level of 100.
So let’s go back and take a look at how each is doing since then…
Buy the Rumor; Sell the News
Overall, each index is up from the June 29 tracking start date:
- The NICI 50 is up 9.3%.
- The NICI Wellness Index is up 7.9%.
- And the NICI U.S. Cannabis Index is up an outstanding 56.2%.
The latter shows what I’ve been saying here since our launch and previously through websites like Money Morning: that the biggest gains to be had going forward were going to come from U.S.-based companies.
Granted, there will still be some Canadian winners. And even the biggest Canadian companies can still generate gains for shareholders at the right buy-in prices. But companies like Canopy Growth Corp. and Aurora Cannabis, companies that have already posted gains in excess of 1,000% in the last year or two won’t be putting up those kind of gains again.
That’s why you have to look for who is about to be in the mainstream news rather than who already is there.
And that reminds me of an important, tried-and-true trading strategy: “Buy the rumor; sell the news.”
What that basically means is that stocks are likely to post much bigger gains when the possibility of something (e.g., a law change, a merger or acquisition, etc.) first becomes known. Once it actually happens, many investors have already moved on or may even be looking to take some gains (sell off the stocks they bought in advance of or right as a rumor came out).
You can see the theory behind this strategy holding up well in recent months.
Take a look at the best day on record for our U.S. index and the Wellness index, September 20. There was an 11.64% and 10.53% surge, respectively, in just one day – that was when word leaked that Coca-Cola Corp. was in talks with Aurora Cannabis about a large-scale investment to create a CBD-based beverage. The deal didn’t come to fruition in the end, at least not yet. But that Coke was kicking the tires on this formerly taboo industry was one of cannabis’ greatest legitimizers to date.
That date happened to be the second-biggest single-day gainer for the NICI 50, which is dominated at the top by large Canadian producers like Aurora and Canopy, at plus-6.46%. The best one-day performance for the NICI 50 was October 15, two days before Canadian legalization happened. In fact, all of our three indices posted gains in excess of 6% on that date – and none of them had a better day on October 17, the day full federal legalization in Canada actually started.
While that wasn’t a “rumor,” it still fits the narrative to perfection. Investors put more money into the stocks based on the buzz running up to the event than the event itself.
You could see this leading up to the U.S. midterm elections last week as well. Both the NICI 50 and the U.S. index posted a top 3 day since we began our tracking on November 5, two days before the election. The NICI 50 was up 6.43%, and the U.S. index was up 6.33%.
Despite the positive election results, with three new states legalizing and dozens of pro-cannabis candidates for the House of Representatives winning, the indices gains on November 7 and November 8 couldn’t come within two full percentage points of November 5. And that’s with a late day surge on November 7 caused by the surprise resignation of cannabis’ most notorious opponent, then-U.S. Attorney General Jeff Sessions.
Of course, cannabis moves so fast that once a rumor gets aired, it’s hard to catch up and buy a stock at a favorable price to lock in the biggest gains.
I’ve said it time and time again, you need to be invested in the best companies before the big news hits. You have to anticipate.
And that’s a driving reason why NICI is here in the first place.
Thanks for being an important part of the National Institute for Cannabis Investors,
Executive Director, National Institute for Cannabis Investors
P.S.: One of the most exciting things our paid-up National Institute for Cannabis Investors members get to enjoy is learning how to become a successful angel investor in privately held cannabis startups. In America, Angel Investing used to be something that only the wealthiest 2% could take part in. But this has been gradually changing over the years. As a member, we’re going to show you all of the ins and outs of this lucrative opportunity. In fact, we even have the details on a unique opportunity already locked and loaded for you. Just click here to find out how you can get in on the action.
9 responses to “Three Indispensable Cannabis Industry Bellwethers to Watch Before Making Your Trades”
November 13 2018