Increasingly, though the mainstream media views the medical marijuana market in Canada as being a legion of shysters chasing mega-digit-stock price jumps, the actual financial data in the marketplace shows a steady now months-long fall in average share prices. And today is no exception.
Sure, new players with big announcements still make jumps from $0.05 to $0.15 on occasion, and I still get relentless messages, mail and tweets from people telling how Prescient’s got crazy news on the way (admittedly,
their deal with Auruora is worth noting, as is their streak to a buck) and Umbral’s going to pop and OMG how can you be ignoring Affinor’s latest Dr Evil plan to install strawberries on the moon.
There’s
plenty of pump to be had for those susceptible to such. But that’s also the case in rare earths and potato vodka and 'gadgets that plug into your TV so you can play poker while showering' worlds, and you don’t get the Vancouver Sun writing
long hand wringing articles about how companies in those sectors are opening volcano island death camps with teams of henchmen and disrespect for puppies.
The weed sector has been slumping. And it has been slumping for some time, specifically because it lacks grownups at the wheel. The quality becomes clouded by the crappy when the crappy is louder, and that leaves people taking their RRSPs back to the sanctuary of blue chips, and 4% annual returns.
That said, such a time is an opportunity that, frankly, I think you’d be silly not to take advantage of.
I’m about to lay some undervalued buy options on you.
One thing to note before we get into it, this list is heavy with companies doing business with the marketing side of Stockhouse. That’s no quid-pro-quo – there are certainly client companies that aren’t on the list, such as Organigram, because they’re not undervalued anymore. There are also some that aren’t clients, such as Supreme and Abattis, that I just think present good opportunities.
The reason for the heavy client company presence is two-fold: Stockhouse is increasingly seen as an important aspect of getting the message out on companies on the move in the medical marijuana space due to our ongoing and indepth coverage of the space. The most viewed medical marijuana company in our system has had over 1.5m unique users look at it in recent months, and you only need a few dozen of those people to convert into investors to really ramp up a stock price.
The other factor contributing to client companies being prominent is because Stockhouse regularly turns companies away from marketing deals when it feels they’re not set up for a high chance of success in the markets. My employers only want us to be associated with the best of breed, something that locked me into working here in the first place, and just yesterday turned down a six-figure marketing deal because the fit wasn’t right. This, to me, is the proper way to handle business.
Client companies are also told that we will, if we see something negative about the company, address that negative aspect publicly. The best companies invite such criticism and know it makes them stronger as it legitimizes positive coverage. The worst want no part in such a deal.
If a company is client of Stockhouse, that should be seen as a badge of honor, as it means they’ve been vetted by us and, in some instances, Stockhouse’s arm’s length investment fund may even participate in the financing of those companies because management believes so strongly in the operation – information that is intentionally kept from the editorial team so as to not influence what we write.
So there’s your full disclosure. And with that out of the way, the Undervalued Seven.
- T-Bird Pharma (TSX:V.TPI, Stock Forum): This recent market launch came out at a decent $43m market cap (I predicted $35m), which many would have seen as a success, but I get the feeling the people behind the company were surprised they didn’t land alongside the Organigram’s and Tweed’s in the $100m range because, you know, they actually have their MMPR. There is a LOT of activity at T-Bird HQ right now, certainly more than you usually see post-IPO and, in fact, possibly more than was even going on before the launch. Volume is very low right now and the share structure is tight, all of which leaves me with the feeling this thing is going to get a lot of elbow shoved into it real soon which should push it beyond a buck and then some. Update: Between writing and posting this piece, has become a Stockhouse client.
- Wildflower Marijuana (CSE:C.SUN, Stock Forum): There’s no more enthusiastic group in town than the dudes behind Wildflower. They’ve been very proactive in getting face time with me, and their story really does look interesting, but they took their time getting press after their mid-June launch, which has seen the share price linger at around $0.20. Only $30m shares out, only $5.7m market cap, and they’re deep into two MMPR applications in BC with word that another could be in the mix, and a significant tech component to their plan that, for mine, is a company builder. For details, watch this space: Deep dive soon. Stockhouse client.
- Supreme Pharmaceuticals (CSE:C.SL, Stock Forum): Everything this company has done in the last few weeks has pointed to a big piece of news on the horizon, including yesterday’s release noting the security upgrades the company needs to complete its MMPR are near, and that the company will be ready for Health Canada prime time attention in November. New management is in, a capital markets advisor has been hired, the recent rollback has the share structure tight, and we keep hearing that their $5m raise to get grow-ready is a battleground for brokers looking to wedge their way in. Personally, I can’t even get them on the phone anymore, which tells me the carpets at Supreme HQ are dripping with sweat, drool and anticipation. With a $21.9m market cap, that MMPR should be a three-bagger when/if it comes.
- Cannabis Technologies (CSE:C.CAN, Stock Forum): Absurdly undervalued. The stock chart on this one is a horror show for a company that is so perfectly positioned for real world revenue and almost no competition. I called CEO Craig Schneider and asked about the share price this morning, and he said he’s really not bothered about the chart at the moment as the company has plenty of big deals they’re working on that will correct things – later. I pressed for detail, as to whether we can expect news in the coming week or so to give things an upward shove, and he said no. “We have a long term view on this thing and we’re not going to play the daytrader game,” he said. “When we release news, it will be because we’ve put things in place to really move to the next level. It won’t be next week. Investors can either wait for that phase and benefit, or flip to something more speculative. We’re building a business and long holders will be happy with where we’re going.” This, for mine, is music to my ears. This isn’t a weed company, it’s a biotech company, and one of the cheapest out there, and with some of the smartest scientists in the country. $0.25, $0.20, $0.15 – wherever it may drift, I’ll hold. Stockhouse client.
- Abattis Bioceuticals (CSE:C.ATT, Stock Forum): Just got out of a meeting with the Abattis guys, and though they’ve been in my top 5 most favoured weedcos for most of this year, they really surprised me with their plans for true vertical integration. In short, Abattis is a weed incubator (hey, can I get one of those for home?), with seven full or partial subsidiaries in a variety of stages of the seed to sale cycle. I feel like each part of that entity deserves its own deep dive, so I’m going to keep talking to them and, if I can clear some schedule time and if they can finish doing due diligence on something they’re working on right now, we’d be talking about an eight-part series over eight weeks, which is indicative of how complex this story is – and indicative of how undervalued it is.
- GeoNovus Resources (CSE:C.GNM, Stock Forum): This one is so crazy it just might work. What GeoNovus is setting up is the Island of Dr Moreau of weed research. Consider this: Uruguay is down with weed. In fact, it’s so down, you can grow it, sell it, smoke it, eat it, make a hat out of it, use it to wallpaper the kids’ rooms, turn it into a lovely salsa – whatever you want. Meanwhile, in North America, we can’t even grow real hemp for use in polymers because our hemp has to be THC-free, and thus is stunted and limited in its use. If you want to research medical applications in the US, you can’t do human trials because, illegal. If you want to research the medical viability of high THC strains, sucks to be you. If you want to make lotions and creams, you’ll need to find a chemistry teacher with a Winnebago and tighty whiteys. So GeoNovus wants to be the crew that, when your science guy hits that wall, you can turn to them out there in South America and say ‘here’s what we need, here’s some cash, we’ll give you a royalty on the back end, now do the research.’ Meanwhile, they’ll grow full sized, full use hemp for export and research on their farm facility. And they’ll develop their own IP during third party research downtimes. Bottom line: It’s a $0.04 stock (make that $0.05 as of today – a 25% profit for early movers already). It has the kind of market cap that would cover the cost of a Surrey two-bedroom. It is MONDO new on the scene. And there’s some legacy mining property in there that might get spun off or sold for doughbucks. To me, a nice option for your play money. Full disclosure: I helped them put together their business concept, but I don’t own any so your investment won’t make me wealthy in any way. Expected to be a Stockhouse client as of tomorrow morning.
- Chlormet Technologies (CSE:C.PUF, Stock Forum): I’ve been calling it ‘the grown up play’, and I stand by that. This company is grinding it back to the green after the unfortunate TSX halt mid-year, and in doing so they’ve got a nice facility in Canada on the move, and US-based options to boot. Slow build, smart moves. Not so sure I’m into their rumoured move to license vertical grow technology from Affinor, which I keep hearing could be subject to legal tussles down the line, maybe, we’ll see, could be, kinda. But Chlormet is sitting on a tiny $4m market cap, has a pocketful of shares out, and the chart is pointing in the right direction. Interesting and worth watching intently… Another Stockhouse client.
There are others that have value that are still worth looking at – Vodis is one, there’s a lot of US movement with them right now and some potentially interesting names coming aboard. Naturally Splendid has a big tech, commercial food additive play developing that deserves far more attention than it has had so far from the market. And one day, someday, we’ll hear from Papuan Precious Metals again and hear what’s up with the dispensary roll-up strategy.
But get those seven on your watchlist and act accordingly.
--Chris Parry
https://www.twitter.com/chrisparry
UPDATE: Plenty of AFI goons have emerged from their strawberry patches to criticise the article below. To answer their queries: I've heard from three different parties that AFI and PUFhave a deal going. If it's secret news, someone's doing a poor job keeping his mouth shut, and it ain't on the Chlormet side. RE: the tech IP issue - whenever I mention something with just an air of negativity about AFI, I hear the same 'you better have a lawyer' BS over and over. If anyone reading this piece thinks I write without having my facts in order beforehand, I invite you to list the lawsuits i've faced to date. The reason AFI bought the rooftop garden in the first place was becausethey were cease and desisted by another company on their use of VDL tech and needed another option. That's an expensive plan B. But hey, I'm sure we'll soon hear more about AFI's grand plan the next time they put out another hostage video - sorry, live stream update.