What in particular are you looking at when you’re determining whether or not you think a company is a good investment? What signs are there that there may be a deal to be had? What are red flags?
Matt, there is a good reason why our proprietary metrics are putting the recommendations of some of the others to shame, In this industry, we look to those companies with strong market presence and growth (or expected to be disruptive), uniqueness (how easily can it be replicated), excellent stewardship (invest in the team) and committed to efficiencies without compromise to effectiveness and of course with an eye on reducing costs. JVs and partnerships. There are some companies that for whatever reason cannot gain traction ... but I feel in time these companies will (or worst case become targets of M&A). I look at their strategies and business plan and compare that to their results. Many believe, the future of Canada resembles dry-flower being the domain of the micro or craft growers and for extractions being dominated by many of the current larger LPs. That framework plays a role in my modelling.
How does that transfer to an LP that is only in the medical stream OR to an Organic play where we know already from the food industry that consumers will pay a premium for certified organic products? I also like diversified and risk management approaches .... whether by business line, geography, etc. The latter may be a reason why we did a case study on Quinsam Capital over a year ago I think when it was trading around a dime and Quinsam pays a regular quarterly dividend. Investors that jumped on it made over 10x (>1000%) their money in just a few short months --- even today despite the overall 2018 bearish sentiment to date ... Quinsam remains up over 300% from that initial coverage.
STRONG BUY. By contrast I also just checked Aurora, Aphria, CannTrust, and Canopy Growth - all of which are all STRONG SELL. Exactly as suspected and expected. That sentiment can change on a dime because TA on a very very basic level is projecting a trend.
Emblem has a share count on the lower to mid end. It's focus is on medical and when attending expos and conferences to get the pulse of the industry - anecdotally only -- one hears patients discuss their experiences and how Emblem oils are first rate. Emblem has a somewhat diversified revenue stream as it also owns GrowWise Health. Emblem has a few different free trading warrants that offer a potential capital steam to Emblem along with providing Investors with a few more vehicles. More check marks. Emblem has been off of the radar of most and is reporting record growth and as mentioned are expanding internationally.
I also like companies that take an existing product with wide appeal and acceptance and in time can slowly incorporate facets of cannabis or hemp into it. A good example could be Dream Water - one of North America's best selling non-prescription sleep aids and it is melatonin based. Harvest One acquired Dream Water and is planning a range of cannabis variants. Aurora's MedReleaf's Sans Rafael line ... that is the brand of their adult use cannabis as well as the name used for their non cannabis beer that is readily available - get the name out there. I love such strategies - as a long term Investor ...
The future to me is simple - Health and Wellness. Does a company line up with that? If it does where does it rank either in fact or prospectively. Simple is good. I approach things differently than many ... many predict price targets or an ROI over a stated time (one and the same when you think about it) ... they focus on the upside and on the potential. I take a somewhat different view - the upside cannot hurt you so why make a price target or ROI prediction. I look at the same upside and conclude if this is a good investment or not and that includes where the company sits on my own risk-reward chart but I look closely at the downside because the it is the downside that can bite you - size of the public share float, dilution, burn rate, lawsuits and other potential adverse events, compensation, warrants, options, etc. As I said earlier .... the ROI is ancillary and it will take of itself if one makes the right decision at the right time and for the right reasons.
So many other facets to consider ...
Will medical benefits cover medical cannabis etc? There are many moving parts and we have always been at the forefront of connecting these dots for our subscribers. Red flags for me ... fluff PRs tend to be up there .. excessive burn rates with little or no revenue and in particular when that burn rate tends to be compensation dominant. I also tend to be concerned when companies show as clients by paid promoters because now I have to try and filter out or reverse engineer whatever impact that may have artificially caused.
61