Earnings season is starting to heat up and so far it has been unimpressive at best. Companies continue to cite weakness as a result of weaker global demand and a stronger dollar, and we expect this to be a theme of this earnings season. The combination of weak earnings, slowing demand, and poor economic data, will create a great opportunity for an investor to buy quality companies at a discount…but you need to know where to look. The markets are trading lower this morning after China registered its steepest monthly drop in its exports since February, with a 10% year-on-year contraction compared with expectations for a 3.3% decline. Although we expect this trend to continue, we want to highlight stocks that we are monitoring for a buy opportunity on further weakness.
MassRoots is one of the largest and most active technology platforms for cannabis consumers, businesses and activists. The social network formed in April 2013 as an online community for people who smoke cannabis.
We are favorable on MSRT and see upside to current levels because of the following reasons: 1) It continues to advance its platform and create new avenues for revenue growth, 2) It has entered into strategic partnerships that has improved and differentiated its product when compared to its competition, 3) The election will serve as a catalyst as it will increase the number of active users on its platform, 4) The company’s cost cutting initiatives have strengthened its balance sheet and improved its financial position, 5) It started monetizing its platform and revenue has grown significantly since it started, and 6) Its valuation has improved.
GW Pharmaceuticals (GWPH)
GW Pharmaceuticals continues to be our top pick in the cannabis sector and we are favorable on the company for the following reasons: 1) It continues to receive positive Wall Street coverage, 2) Its deep pipeline of products will create catalysts for years to come, 3) It possesses valuable intellectual property that makes it a very expensive acquisition target, and 4) The shares are trading below the average Wall Street price target.
We continue to believe that GW will be one of the greatest beneficiaries from the legalization of medical cannabis and the shares are a perfect vehicle for anyone who wants to enter the legal medical cannabis sector but is still hesitant to do so.
Aurora Cannabis (ACB) (ACBFF)
Throughout 2016, we have continued to recommend Aurora Cannabis (ACB) (ACBFF) as the Street continued to undervalue the company’s stock. Aurora’s Canadian symbol, ACB, and its United States symbol, ACBFF, have rallied more than 200% since late August and we continue to hold onto the shares in our mock portfolio.
We remain favorable on Aurora at current levels for the following reasons: 1) It continues to strengthen its management team and board, 2) It is bringing on new patients at industry leading rates, 3) It is building a 600,000 sq. ft. facility that will have an estimated annual production capacity of over 70,000 kg of cannabis, 4) Its financial position continues to improve, 5) The company recently commenced trading on the TSX Venture Exchange and we expect to see them up-list to the TSX in 2017, and 5) We expect the company to report that it is cash-flow positive before the end of the year.
General Cannabis Corporation (CANN)
announced that it was made aware of and requested by the OTC Markets Group to comment on recent trading and promotional activity.
- The OTC Markets reached out to General Cannabis and told the company that it had received copies of promotional newsletter emails encouraging investors to purchase shares of common stock. This promotional activity coincided with higher than average trading volume and the company said it was unaware of the promotional activity until they were informed by OTC Markets. The company said it is unaware of the full nature and content of this promotional activity, the responsible parties and the extent of the email newsletters’ dissemination.
- General Cannabis Corporation said it has not, other than disclosed in its Form 8-K filed with the SEC on September 26th, disclosed the offering pursuant to which CANN issued an aggregate of 4,500,000 Series A Warrants exercisable at $0.35 per share and 4,500,000 Series B Warrants exercisable at $0.70 per share, none of which have been exercised.
- On October 12th, CEO Robert Frichtel filed a Form 144 indicating his intent to sell 100,000 shares in accordance with Rule 144. On the same day, CEO Frichtel sold 25,000 shares of common stock in in the $3.64 to $4 range.
The timing of the insider sales and promotional activity are very coincidental and this raises some red flags in the eyes of investors, the market, and regulators. Although this could just be a coincidence, it does not look good especially for a company that was previously suspended by the SEC. We have no skin in the game, we hold no positions, but are watching closely after a 40% drop yesterday and we expect to see further weakness going forward, despite today’s bounce. We will keep you updated on any significant developments and we are of the opinion that taking profit anytime a company makes over 100% gains in a brief time segment is always smart. Remember, no one ever went broke taking profit.
MAPH Enterprises, LLC | (305) 414-0128 | 1501 Venera Ave, Coral Gables, FL 33146 | firstname.lastname@example.org