We kicked off the week with a 40% win. And that’s just an early taste of how profitable the cannabis industry will be…
If you were able to follow along my instructions exactly, you made a 40% profit.
If you aren’t familiar with the company, Hexo produces marijuana for the medical market in Canada, and it’s gearing up for the recreational market. As a small (by Canadian standards) producer with a regional focus, HEXO could prove an attractive acquisition candidate at some point.
Cannabis Profits Daily readers won’t be surprised to learn that I like Hexo’s branding strategy – that’s the key differentiator I see separating the good companies from the also-rans.
Hexo also scored with a lot of the other things I like to see in a cannabis company – low cost production, a top-notch management team, and a key partnership with a larger company (in this case Molson Coors). An imminent listing on the NYSE American exchange didn’t hurt either.
I still like the company, but I thought it was as good of a time as ever to net a double-digit gain in a short time.
My trader hat was on for this trade as much as my analyst hat. Hexo had been unfairly beaten up during the cannabis market downturn in November and December of last year. I knew two things: that it was time for the cannabis market to turn, and that Hexo would be among the strongest and fastest turnarounds.
This chart tells the story. December 17 was the date I identified when it was time for the market to turn, so I definitely wanted to put Cannabis Investor’s Report members in something. But what? Checking the charts, I found that after being a better performer for some time, albeit in a falling market, Hexo’s performance fell short of industry leader Aurora Cannabis (NYSE: ACB)‘s right on the date when I called the turn. That was our chance! We got one of the highest-quality cannabis stocks not only at a low price, but at a low price relative to its closest comparable stock.
You can see the results after that. Aurora’s stock recovered nicely – it was up 33.6% in the 2.5 months since we entered the trade. But Hexo recovered even more nicely – up 54%.
And that disparity in return is why I recommended selling it when I did. It bounced back stronger than Aurora and much stronger than the overall stock market. With it now trading closer to a fair price, I judged that it was appropriate to take some money off the table to make room for the next opportunity.
Why not buy Aurora, since it’s now the relative underperformer? Because I think there are even better opportunities now among some smaller players. Back in those down days of December I knew that the biggest, most liquid cannabis stocks would be the first to come back. But having come back, they’re now more driven by their actual results than by technical factors.
I’m excited to hear how you’re going to use the money you made from the Hexo trade in your personal lives.
I know some of you are using it to buy more cannabis stocks, and we’ve seen others say they want to sit on the gains and wait for the next big opportunity.
Whatever you decide, we’re thrilled to be there with you for the ride.
Thanks for being an important part of the National Institute for Cannabis Investors,
Executive Director, National Institute for Cannabis Investors
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33 responses to “This Is How You Identify the Top-Tier Cannabis Stocks”
March 02 2019