RE:CGC/Sector Predictions for the Long-Term *Going on Record*I welcome the buyouts to come. Do you have any idea the premiums that are paid out to shareholders when a buyout occurs. Once the first buyout is announced it will start a new "will we be next" frenzy in the remaining companies.
I think you are very wrong that the easy money has been made. The majority of the population doesn't even have MJ on their radar. There is still a lot of people who who learn the story and look for ways to make money. We will have a substantial run of the task force if the announcement goes well (there's been not reason not to expect good news). I think there will be a large profit taking and consolidation to follow. But with each of these events there are new people introduced to the industry.
Once there is is more political certainty funds will begin building positions.
This spring/summer there will then be the first tabling of legislation. You don't think this will again create a frenzy?!
Following this I agree there's will be less catalysts. We will mainly be watching revenue numbers to see who fails and who takes flight. This whole time there will be buy outs and speculation that will reward the successful companies.
So you still think the easy money has been made and the industry will be more or less grind it's way forward?
I think NOT! Haha
FalconM wrote: I have focused my comments on the short term, but over the weekend my mind couldn't help but wander further into the future and I can't help but do at least one more long post (probably resembles an essay more than a 'post') before really turning my attention to work/school.
I’ve said many times that the task force report is going to be the biggest momentum play the sector has had since Trudeau. What can we expect after? Let’s actually consider the Trudeau election experience. After Trudeau got elected, his re-affirmation and commitment to legalization no longer had an impact on moving the stock. In the past, I have anticipated the introduction and passing of legislation as further catalysts, but I think post-task force report, legislation related news will likely have no impact, much like Trudeau confirming his commitment to legalization post-election. The stock will likely sustain a gain from this task force run, as these expectations gets baked in. In that sense, the stock will be susceptible to negative legislative developments more so than positive. Right now I think the baked in price for positive legislation could be the increase to 3.65, while retail pays a premium at 4.00-4.50.
I believe the price will certainly return to this level, but that doesn't mean it won't go lower. During this past year, lets face it, the easiest money has been made. For all of us who’ve been investing here consistently for the past year, give yourself a high five. You’ve done very well. It was hard to lose regardless of which LP you chose. We've thrived on what needs to be recognized as an insulated speculative market - insulated from competition that is. We need to bring our euphoria into check because next year there will be many more risks involved and I’ll tell you why I think that.
After the task force report, I think the political hype game will be over. All the political developments will be more or less revealed, albeit the legislation receiving royal assent – but even still, no one will expect the legislation to be drastically changed in the house of commons and the optimal situation will likely be priced in as I discussed above. I believe these ‘growth stocks’ will experience growth from 2 things following the task force report. First, revenues from medical and recreational markets (locally and international). Second, the sector winners will become more clear. What do I mean by that? After the task force report, the cat will be out of the bag and it is likely that big pharma, tobacco and the booze industries will make their moves, as speculation in the regulatory framework will be largely removed. In this sense, the task force report is actually a double-edged sword and no one on here has mentioned this. Institutional investors are waiting, not only for clarity in terms of legislation, but also in terms of these winners and losers. In fact, this has been mentioned by several institutional investors time and time and time again. Companies that get bought out will be winners. Others left on their own will struggle against the nearly limitless capital of their bought-out competitors. The anticipation of this will begin to suppress the SPs of LPs over the medium to long term after the hype is over. Such risk factors are not being incorporated into the stock because the focus is on the task force, and hence why Mpartners maintained their price target and issued a rating of “hold” (a.k.a. sell), because these gains are not sustainable due to them being driven by emotional exuberance similar to the dot com bubble, where some companies lost 70+% of their value as the losers got shaken out.
Moreover, during the many months/years to come before recreational profits replace speculation with fundamentals, there will likely be a major correction in the general economy. So, you can picture some time from now when the stock is stable and has volume low, downward pressure will emerge to push it even lower. There was one in 2015, another 2016, and there will likely be a bigger correction sometime in the future. If the SP 500 is down 20%, it will provide a great opportunity to those who stay out to buy the red, while the bag holders get pwned.
So overall, my thesis if you will, is that I think the easy money has been made. The top might not yet be in for the short term, because the shorts cannot move with total confidence until the task force report momentum has died. The stock will continue to fluctuate drastically until the report, as moments of weakness will be exploited by both sides. I can easily see wild fluctuations between $5.00 and $10. People are essentially gambling on future waves of buyers in the very short term, but perhaps those people who were eager to exploit this hype already came in , or maybe we are just seeing the tip of the iceberg, much like the drop immediately following Trudeau's election was followed by a rise 2-3x as large. I think it's safe to say its gambling at this point, speculation at its most volatile, so adjust your risk/reward ratios as you see fit.
But, just keep in mind, that there is at least a solid argument to be made that next year will be more difficult than the last as the most threatening risk factor comes into play, namely competition. I am confident in this because if the deep pockets will want to enter the sector before the rec. market goes into full swing and the LPs are still vulnerable and under capitalized. This isn't being predicted by me, but by countless analysts who are sitting back in wait.
I have high hopes for CGC, but there are no guaranteed winners. As the sector begins to develop further I think this euphoria we’ve gotten so use to will be brought in check. I’ve found it to be very beneficial to exercise extra caution in an extremely volatile sector. Will the extraordinary gains we’ve made during this past year be sustainable the next? For some yes, but maybe not all. Knowledgeable institutional investors have always shown caution in this sector, I think post-task force report, when the second and potentially last major political catalyst has been exhausted, I think it will pay to start listening to them.
Cheers & GL