🌿high af on weed shares 🌿
|Sep 11, 2018|
Welcome to Better Have My Money, my Monday night newsletter about stocks for clueless newbies aka all of us (and if not, this newsletter probably isn't for you), who are trying to figure out the world of investing in stocks. Better Have My Money is a gif-filled rundown of the stock market, from why we should care about shares when the world is burning, to thinking about the market like it's a bad boyfriend and figuring out how to keep our investments as diverse as the people around us.
I am writing this off my phone using a wireless keyboard on a rainy day while drinking Old Fashioneds at a bar in Lancaster, Pennsylvania cause I’ve missed the last two newsletters due to travel and I was determined to not miss a third. In related news: PA makes a lot of local whiskeys. Who KNEW?
Despite the booze, my focus today is weed. Marijuana stocks are really high at the moment and it's been quite a trip. (I'm sorry, I have to make weed puns, it's the law under the Controlled Substances Act!)
Only a few weed companies are available in US stock markets — specifically Canadian companies Canopy Growth (CGC), Tilray (TLRY) and Cronos Group (CRON).
So in mid August, Canopy Growth inked a deal with Constellation Brands (STZ), a huge liquor company responsible for brands such as Mexico's beach drunk beer Corona. Constellation, which was already an investor in Canopy, put in another $3.8 billion, ensuring it now owns 38% of Canopy. This is all apparently because people are supposedly excited about cannabis infused drinks?
But this investment saw Canopy shares jump a whopping 30% in just a few days. In the last month, Canopy has jumped nearly 85%.
Chatter about other possible investments from other major drink companies and other investors began and suddenly marijuana stocks were the hot new thing. Prices jumped a huge amount in just a few days and it felt like riding the bitcoin bro wave which... no.
Tilray, the first "plant-touching" weed company to IPO on a US stock exchange (the other pot companies had already floated on Canadian stock exchanges first) in late July has jumped 219% in a month.
Confusing term of the week: "plant-touching company" — basically whether the company cultivates, distributes or manipulates the actual marijuana plant itself. Some other weed related companies are involved in selling hydroponics products or other related things that help the growing of plants but they don't actually GROW the plants. Or, touch the plants, as the weird term indicates. Plant-touching companies are more at risk of any kind of charges for illegal activity since they are dealign directly with the plant.
But just to reiterate: Tilray jumped over two hundred percent in just a few weeks! Like, I think this kind of insane (and clearly unsustainable) growth is sort of hard to comprehend, but can you imagine that one month ago you bought four shares for about $100 and those four shares are now worth $345. Now imagine if you'd spent $1000, or $10,000 or $100,000 (look if you're spending $100,000 you're not reading this newsletter, but still, just imagine!!!!) and in a few weeks it had jumped 219%. It's wild and also concerning.
It's all so insane that the US Securities and Exchange Commission is literally warning people about the risk of marijuana investments being a scam. Seriously!It published a warning: "Fraudsters may try to use media coverage about the legalization of marijuana to promote an investment scam... Fraudsters may manipulate stock prices (for example, causing them to rise or fall dramatically) by spreading false and misleading information about a company."
Personally I bought stock in Cronos back in March, because it was literally the first weed company to float on the US market. That’s it. I wanted weed shares, and it was my only option at the time, so I bought around $700 worth. (Here's my regular reminder that if you open a Robinhood account, which lets you buy and sell stocks with zero fees, use my referral code and we both get a free share.)
For months my Cronos Group shares have tormented me, leaving a huge red hole in my investment lineup. I've written about this a bunch of times! I purchased them at a terrible time, paying $9.67 back in early March. The second I bought them, they dropped in value. And then continued to drop in value.
As I’ve written before, I kept trying to buy more when they dropped, convinced they would eventually rise again and helping to bring down my overall cost of them. This is a terrible technique, never do it.
And... it took six months, which overall is probably not very long but it's been a long six months of having an investment down around 30%, however finally they rose. In the last month Cronos has gone up 101%! At first it was slightly gradual and then in two days it jumped from $8.54 to $12.04. Now it's at $12.16.
Short seller Citron Research (meaning it's wanting the price to drop so it can make money) tried to arguethat Cronos had omitted key details about how big its production was in its press releases to make itself seem more powerful than it actually was. There's a lot of chatter about howweed stocks are all just a big bubbleand to be wary of them and that they're currently overvalued.
Which has led me to a major thinking point this last few weeks: when do I sell my stocks?
When should you sell your shares? Obviously, the plan is always to buy low and sell high. But how high should it be? If it’s gotten high after just a few months, should you keep holding on to see how high it is in a few years? Or, if it’s something as turbulent and prone to collapse as marijuana, a new and emerging market, do you just get out as soon as you've made some cash?
In the end, I decided to hold on to all of them for now as recreational weed becomes legal in Canada on October 1. It's just a few weeks away! Cronos partnered with MedMen, the Apple store of weed, for sales in Canada. Personally, Cronos doesn’t seem like the smartest choice, Canopy Growth is the biggest supplier and if I had my time over I would have bought them. However, here we are.
Plus, since I've owned these shares less than a year, I would have to pay a higher tax rate on them if I sold them now.
But having money in weed stocks has made me feel like the stock market is an absolute scam. My money SHOULDN’T nearly double in the space of a few days. That seems... completely bonkers and obviously not sustainable. And it set off all my spidey senses off, like hello do not trust get rich quick scams!
It’s made me think a lot about what kind of risk am I actually willing to take. And it’s less than I thought?! Maybe it’s a percentage for you, maybe it’s a dollar value. Right now I feel OK losing $500 (my total stocks investments are about $5800) but not OK losing $1000.
Previously I had thought of these stocks investments as money that I am happy to play with but turns out now I have made some cash off stocks, I am not actually cool with losing it all. I've decided instead to focus on percentage of the total portfolio. My weed stocks make up about 15% of my portfolio. I'm OK being risky with 15%. What percentage are you OK with being risky with? Reply and let me know!
@lassenlovesbeer: "You have no idea how much I needed your blog in my life & how serendipitous the timing was when I came across it" — I honestly genuinely appreciated that several people questioned me on where the hell my newsletter had been the last few weeks, and this was the most lovely comment of all.
Better Have My Money is on Twitter @bhavemymoney, so please tweet nice things (aka the link to our sign up page) and tag us. Got a mate who also likes weed? Forward this onto them and tell them to subscribe.
As always, if you've got any questions about stocks, this is a shame free zone. Just reply and ask away.
And finally, I went to a dear friend’s wedding on the weekend, and she’s dedicated much of the last few years to encouraging literacy and education for young girls in developing countries. Is there a cooler bride than someone who tells every guest to donate to the organization Girls Not Brides on her own wedding day?