Investing

Checking in on Our Cannabis Seed Investments

By Adam O'Dell  |  October 24, 2019

I was pleasantly surprised by the conversations I had with Cannabis Paydays readers who attended our Irrational Economic Summit a couple weeks back.

Our portfolio of open positions has taken a good deal of heat (aka drawdown) alongside the industry’s growing pains this year. So, I was expecting inquiries along the lines of: “Why are we getting our teeth kicked in right now?”

And instead, folks were asking me if they should “double down,” what my next buy recommendation will be, and why the masses still don’t seem to “get it” with regards to the industry’s legitimacy and long-term profitability.

In a few words, most of the investors I chatted with were “woke,” “bullish,” and “strong-handed.”

They weren’t going to let an industry-wide shakeout deter them from staying the course and remaining exposed to the industry’s massive growth rates.

Still, I found myself in an awkward position on Thursday evening as I reviewed my presentation slides for the talk I gave on Friday, titled “20 Trade Ideas for 2020 and Beyond.”

Included among my 20 picks were five of the individual cannabis stocks that are currently open in the Cannabis Paydays portfolio. Click here to access the five cannabis stocks to watch.

So here I am, about to pitch the business case for each of these five companies to a live audience of 250 investors, and all the stocks across the whole cannabis industry had been slipping lower and lower all week.

Nonetheless, I persevered.

Sometimes “Less Bad” Is the Best You Can Do

Fact of the matter is, there’s no “perfect” time to get into the market… or to get into a new investment strategy, like my foray into building a portfolio of “seed” investments in the cannabis space.

I made my first Cannabis Paydays recommendation on May 1 this year. That wasn’t particularly good timing, in hindsight. Heck, it was pretty poor timing, actually.

But so it goes sometimes, when chance works against you.

Still, as I review our portfolio of open positions each week I’m still confident that we’re taking the right approach to finding the industry’s most-likely moonshots — even if we’re having to take heat on our positions, for now.

All in all, our portfolio is holding up relatively well. Consider a few comparisons, or “comps” as they’d call them in the real estate industry, to the cannabis industry’s most-heavily traded ETF, the ETFMG Alternative Harvest ETF (NYSE: MJ)

MJ’s highest high over the last two years came on September 18, 2018. Since then, shares of MJ are down 52.4%! Meanwhile, the average return of the 13 open positions in my Cannabis Paydays portfolio comes in at a positive 4.1% in the same time.

Note: I’m not trying to claim that we have earned those returns on our 13 open positions — we have not, as we didn’t begin buying into the industry until this past May.

But the point remains, the stocks we’re in now have done demonstrably better than MJ ever since MJ peaked last September.

Let’s Consider Another Timeframe…

MJ’s highest high this year was made on March 14. Since then, shares of MJ are down 49.4%. Meanwhile, the average return of the 13 Cannabis Paydays positions comes in at a positive 9.1% in the same time.

Again, while we haven’t yet captured the profits potentially available in our positions, the stocks we’re currently in have outperformed MJ dramatically ever since the broader industry peaked in mid-March.

Next, let’s consider from May 1 to present, as that’s when I first began building the Cannabis Paydays portfolio, one stock at a time.

Since May 1, shares of MJ are down 44.9%, while the average return of our 13 open positions comes in at a milder -11.2%. Indeed, the stocks we’re currently in have suffered along with the broader industry… but they’ve fallen, on average, only one-quarter as much as MJ.

How Is Cannabis Paydays Doing in October?

Thirteen open positions are up an average of 5% month-to-date in October. Shares of MJ are down 3.5%.

How have the positions performed since that Thursday evening, the night I was reviewing the Irrational Economic Summit presentation I was committed to giving the following day?

Well, the 13 positions are up an average of 7.4% since then — the five picks I gave to attendees are up an average of 9.6% — while shares of MJ have gained a milder 4.8%.

All told, it’s possible that the broader cannabis industry has found, or is at least very close to finding, a near-term bottom.

Regardless, though, I’m continuing to hunt for and identify individual stocks that meet my Cannabis Paydays strategy’s criteria. As I said earlier, there’s really no perfect time to get into the market. And even though we’ve had to take heat early on, I’m still uber-bullish on the industry as a whole.

I’d love for you to join me in this endeavor, and with prices pulled back now’s a great time to jump in!

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Adam O'Dell

As Chief Investment Strategist for Dent Research, Adam O’Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with minimum risk. He achieves this with his perfect blend of technical and fundamental analysis.

Tactically, he does extensive back-testing and probability-based research. It’s the ultimate partner to the exhaustive research that Dent Research co-founders Harry Dent and Rodney Johnson do in the exciting realm of the new science of investing.

Adam is also the executive editor of our hugely successful trading services, Seven-Figure Trader, Cycle 9 Alert and 10X Profits.

He has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high-profit potential.

Aiming to find the best opportunities across all asset classes, Adam expanded into the commodities, equities and futures markets. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. MORE FROM AUTHOR