Ted Ohashi[Ted Ohashi
As we reported in Let’s Toke Business on November 3, 2017, “Lexaria Bioscience Corp. (OTCQB: LXRP) (CSE: LXX) announced it has received a new Notice of Allow-ance from the United States Patent and Trademark Of-fice (USPTO) for the use of its technology as a delivery platform for all cannabinoids including THC…. Although LXRP stock is up significantly since the announcement, we have consistently extolled its investment virtues and it remains one of our favorites.” At the close prior to the release, LXRP closed at $.39 and one week later, the shares are in the $.68 range – almost a new high and a gain of over 75%.
Many investors who didn’t own Canopy Growth or Lexaria Bioscience lamented the fact they missed the boat - again. “I’m always unlucky,” bemoan some while others claim “Events like this are unpredictable.” But rather than lament the facts, it is a great time to remember that “those who don’t learn from history are doomed to relive it.”
These were both very predictable events. In fact, both were widely forecast.
In Let’s Toke Business April 1, 2016 after Philip Morris (NYSE: PM) invested in Israeli based cannabis com-pany Syqe Medical, we said “The importance is it gives us a glimpse at the investment endgame in marijuana, probably still years away. The tobacco and alcoholic beverage companies will buy up cannabis companies when appropriate.” We are not pointing this out to boast about how prescient we were because several others expressed the same idea. Many investors and their advisors foresaw what would happen in the future is the large tobacco, alcoholic beverage and pharmaceutical companies would take over the clear cut leaders in cannabis. The lesson is that many investors knew that part of Canopy Growth’s investment future included being bought into and eventually bought out by one of these big companies. It may not have been the main reason an investor bought Canopy and it may have happened sooner than expected but it was certainly one of the reasons.
In the November 4, 2016 Let’s Toke Business after Lexaria received its first U.S. patent we said, “This is the first of LXRP’s eight patents pending to be issued and it protects the intellectual property related to infusion of cannabinoid compounds in edible products. There are also two continuation applications filed under this patent which seeks issuance of the remaining seven patents pending pertaining to agents such as psycho-active cannabinoids (THC), fat soluble vitamins such as A, D, E, K, non-steroidal anti-inflammatory drugs (NSAID) such as aspirin or Tylenol and nicotine. Each of these markets is significant in its own right. Again, we are not bragging because we were certainly not alone in holding this view. We are simply pointing out, this expectation was there. To many long term owners of Lexaria, this comes as no surprise. If there was something unexpected, it was that all four agents are covered. Most thought it would probably take another two years the complete this portfolio. But it was a factor in the decision to own the stock.
Quite often investors of all experience levels tend to focus too much on the short term. They think long term factors won’t have an immediate impact so they forget about them. But as we showed these are long term factors that could well have a major impact on the investment values for these two companies. In Canopy’s case, when a company as large as Constellation made a move, it did so above market and triggered additional buying in the market that carried Canopy’s price much higher.
In Lexaria’s case, we pointed out several times that non-cannabis applications of their technology were po-tentially larger than the cannabis potential. (see Lexaria - The Best Cannabis Technology You Can Eat) As we said last week, “…if you look at the four areas that are covered by this Notice of Allowance, cannabis is
by far the fastest growing but also the smallest by a substantial margin. Vitamins are almost 4X as large, NSAIDs are some 7.5X as large and tobacco is nearly 100X as large.” Again a longer term consideration of significant investment value.
If you think you are going to go through a lifetime of investing without ever making a mistake that expectation is your next error. But if you missed Canopy or Lexaria, you should learn from your mistakes. In his book ‘Extraordinary Tennis for the Ordinary Tennis Player’ Dr. Simon Ramo showed that while professional tennis players win points, amateur tennis players lose points. His advice to amateurs to play better tennis was to minimize your mistakes. In other words, just keep getting the ball back any way you can and your opponent will ultimately lose the point.
You can say the same thing about investing. Great investors such as Warren Buffett make wonderful invest-ment decisions that generate above average returns for decades. On October 16, 2008, when the stock markets were crashing and many economists were calling for a recession and a financial meltdown worse than the “Great Depression,” Buffett said in the New York Times, “Buy American. I am.” It was a courageous and great call.
But it’s the kind of decision amateur investors make about as often as amateur tennis players hit a backhand, cross court passing shot. Not very often. If you have invested in the cannabis stocks, you can consider you have already made a great decision. If you haven’t done it yet, there is still time but don’t waste any time. Then from this point forward, concentrate on reducing the number of investment mistakes you make. The lesson from the Canopy/Lexaria examples is don’t let short term factors frighten you into reversing the one great call you have made. After all, “If you don’t profit from your own mistakes, someone else will.”
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