65
We have advised you of the importance of filtering out the noise and how hucksters use game theory such as variations of the Monty Hall Problem to manipulate investors that in turn may move share prices in the direction the hucksters want. Fundamentally, what has changed from last summer until now? All good things right? The Senate cleared the legislation and provinces are not only taking action to implement distribution but are also introducing their own punitive legislation to tackle black market supply and distribution – measures that are in addition to existing and proposed Federal laws. The American President appears to be on side with reinstating in fact or appearance all or some of the Cole memo, etc.
Perhaps the issue has more to do with the stocks rising 400% or more in just a few months (late summer into late autumn/early winter). Many stocks are still up well over 100% from September. One cannot dismiss such an ROI. Remember, ultimate cause is what is important. As a very loose analogy, one could line proximate cause to technical analysis and ultimate cause to fundamental analysis.
We have stated from the onset that Technical Analysis is key to timing entry and exit points. The RSI (Relative Strength Index) was pretty much over 70 across the board as 2017 ended and that plainly means “overbought”. Our December and January articles emphasized it was a good time for investors to get back to basics and adjust their portfolios accordingly. This is not to scold anyone who did not … but rather, the fundamentals are stronger than ever and the RSI is pretty much under 30 across the board signaling “oversold”.
Let’s use Canopy Growth as our example – some say a $5.5B valuation on an expected $80M-$100M annualized revenue is proof that the company is overvalued. What is missing of course is that the lowest estimates I have seen give Canopy 20% of the soon to be recreational market. The lowest valuation of the recreational market that is out there that I have come across is around $5B. 20% x $5B = $1B.