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CASE STUDY
Fundamental Analysis uses many techniques to derive the value of a company because of its focus on the company’s core business and its future potential. These techniques also apply at the sector and industry levels. At a basic level, Technical Analysis uses charts and other data about a stock to detect repeating patterns and the successful trader times with near precision when to take a position (long or short) and when to close that position. To see this in action, look up the stock price leading up to and after a private placement or bought deal that includes the right to acquire shares at low prices for participants. The primary shortcoming of Technical Analysis in this industry is the lack of trading history for many companies and the continuously changing landscape. However, both techniques can be very successfully about the same stock at the exact same price entry point as the successful long term Retail Investor.
Example: $1,000 invested in Pineapple Express (PNPL) in June 2015 was worth well over $2,000,000 mid-day on March 31, 2016! A $2,000,000 investment on March 31 was worth just over $450,000 on May 3! Any trader that went short when the stock peaked may have made over $30 a share in that time.
This paradoxical reality, I believe, is rooted in the Ecoforming of the industry as the entire environment of this industry is being transformed dramatically before our eyes seemingly weekly. The Retail Investor is far nimbler than the Institutional Investor and can enter and exit positions with ease. Does the industry today at all resemble what it was just three years ago? When you attend Expos such as LIFT, the speakers and vendors have evolved and that is the tell tale sign.
Market leaders by product or sector will eventually emerge. Does anyone not think that the giants of the Alcohol, Pharmaceutical, Tobacco are not watching this industry’s framework unfold? Since this article was published in April 2016: Shoppers, Loblaws, Constellation Brands, and Alliance One International to name just a few have entered the industry in varying degrees.
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Cannabis Investing 101