[Editor’s note: This story will be updated each week with new stocks and analysis. Please check back often for Mark’s latest take on marijuana penny stocks.]
There is no doubt that the cannabis industry is here to stay. In my opinion, legalization on a federal level in the United States will occur sooner than most analysts think. This will cause the industry to boom even more.
This is because federal legalization means that recreational and medical marijuana companies will be able to engage in standard banking procedures and practices like other businesses. This exclusion from standard procedures has been an impediment to the growth of the industry. Many cannabis companies are literally forced to pay their taxes with cash.
Marijuana penny stocks are especially appealing to some people. Every investor has dreams of investing a couple thousand dollars into a penny stock company that will become the next Apple (NASDAQ:AAPL) or Facebook (NASDAQ:FB). Then they can head off into the sunset and live happily every after.
However, you need to be very careful if you want to invest in this highly risky sector of the markets. Many of these companies will not survive. There is a reason why they are trading as penny stocks. But it is reasonable to assume that in an industry with as much potential as cannabis, there are some future millionaire makers out there.
These are not “buy” recommendations. I just want to share some insight into this part of the equity markets that may help you with your own investments.
The Green Organic Dutchman (TGODF)
The Green Organic Dutchman (OTCMKTS:TGODF) is a Canadian-based cannabis research and development company. Aurora Cannabis (NYSE:ACB) was a major shareholder of TGODF. However, last week the companies announced that Aurora has sold its 28.8 million shares at a price of $3 CAD to a syndicate of Canadian Banks. TGODF stock dropped over 10% on the news.
The Green Organic Dutchman says this will ultimately be a good thing because it no longer has any revenue-sharing arrangements with Aurora. Does this mean ACB is negative on TGODF? Not necessarily. Aurora has many problems including huge losses and an excessive amount of goodwill. Selling its TGODF stock could just be a relatively easy way to raise some badly needed cash.
This transaction could weigh on the stock in the short term. This is because this syndicate of Canadian Banks are likely to have to get out of their positions, so traders know that there will be sellers in the market.
Pure Global Cannabis (PRCNF)
Pure Global Cannabis (OTCMKTS:PRCNF) produces cannabis products for the medical and adult use markets. Products include dried flowers, cannabis oils, softgels, edibles and beverages.
This company just announced what it considers to be an important milestone in its history. It has received approval from Health Canada for its most recent license. This will allow it to sell cannabis oil products. This will also help the company get approvals for phase two cultivation and extraction.
PRCNF shareholders can’t be too happy. Like many others in the industry, the stock has not done well. Since earlier this year it has dropped from 30 cents to current levels around 8 cents. It is too soon to know if this news will help to turn things around, but there doesn’t seem to be any effect on the stock yet. I will be watching this one.
Heritage Cannabis (HERTF)
Heritage Cannabis (OTCMKTS:HERTF) is focused on becoming a vertically integrated cannabis provider. HERTF just passed the 30 cent level. This level was support in June. It was also a resistance level from May through October of 2018.
Why would a former resistance level become a support level? It is because the people who sold it at the resistance level were feeling pretty good when it went lower. But then it rallied and went higher than that level. Now those sellers believe that they made the wrong decision. They tell themselves that they will buy it back if it drops once more.
Those who bought it at resistance were feeling good when it went higher and they are now looking at a profit. They tell themselves that if the stock drops back to that level they will buy more and add to their positions.
Emerald Health Therapeutics (EMHTF)
Emerald Health Therapeutics (OTCMKTS:EMHTF) grows and sells medical marijuana in Canada. It also develops natural health products. Emerald just announced that its 50%-owned joint venture Pure Sunfarms received an amendment to its license from Health Canada. This amendment will allow the joint venture to sell and distribute Pure Sunfarms-branded cannabis products. Pure Sunfarms has already established a distribution agreement with the British Columbia Liquor Distribution Branch.
This comes after an announcement that Pure Sunfarms entered a supply agreement with the Ontario Cannabis Retail Corporation. Pure Sunfarms will begin shipping to Ontario and British Columbia in the coming weeks.
In addition to this potentially bullish news, Emerald also recently disclosed second-quarter sales of $5.1 million. This was an increase of 94% versus the first quarter.
Choom (OTCMKTS:CHOOF) cultivates and sells cannabis for medical purposes and related products. Needless to say, shareholders have not been happy. The price of CHOOF stock has lost about 50% of its value since March. However, there has been a series of seemingly positive developments. Maybe this will help the stock turn around.
Choom has recently announced that it is opening seven new retail locations. These include stores in Alberta and British Columbia. In addition to these new stores, Choom has also made a series of acquisitions including Ninetails Cannabis — a licensed cannabis retail store in Whitehorse, Yukon.
It is too soon to know whether these announcements will turn the stock around, but Choom is a name worth paying attention to.
Leafbuyer Technologies (LBUY)
Leafbuyer Technologies (OTCMKTS:LBUY) operates an online platform that connects consumers with dispensaries. Shareholders of LBUY have been dealing with a harsh buzz. Having lost 90% of its value since March, the stock has basically crashed.
Since the beginning of August there has been huge volume of trading. This could be a sign of capitulation and a signal that LBUY stock is about to turn around.
Capitulation is when sellers throw in the towel. In other words, they just want to get out of the stock and put an end to their misery. They just want to sell it — and they don’t care about the price.
Ironically, this could be a bullish dynamic for the stock. This is because the sellers are about to leave the market. Due to the lack of sellers or supply that exists after this, buyers will have to pay much higher prices in order to complete their orders. This will cause the stock to rally.
Helix TCS (HLIX)
Helix TCS (OTCMKTS:HLIX) provides technology, compliance and security solutions to the cannabis industry. HLIX recently announced that it added a seasoned veteran to its leadership team. Garvis Toler, the former global head of capital markets at the New York Stock Exchange, is Helix TCS’s new president of data services.
The cannabis industry is full of incompetent management. Many of the entrepreneurs that founded successful companies do not have the skills required to manage their businesses as they grow and mature. The fact that Helix is bringing in someone with extensive experience could give it a competitive advantage over its rivals.
In addition to this potentially positive development, the company also just announced second-quarter results. It highlighted that revenue was $3.9 million, which was up 108% from the same quarter last year, while gross margins were an impressive 49%.
At the time of this writing Mark Putrino did not hold any positions in any of the aforementioned securities.
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