Is the highest ASX cannabis performer worth the investment during 2020?

Over 2019 Cann Group Ltd (ASX: CAN) plummeted by 82% . In turn, investors sold their shares and CAN appeared to be another speculative cannabis stock.

However, CAN surged by 177% in the first three weeks of 2020. Consequently, CAN’s impressive increase makes it the best ASX cannabis stock performer in 2020*.

Why has CAN increased by 177% In 2020?

Price Sensitive Event (PSE) one: Speculation around Coca Cola launching a range of CBD drinks

CBD is heavily integrated into society. Making it believable to investors that Coca Cola could be interested in entering the market.

Speculation around Coca Cola partnering with Aurora Cannabis (NSYE: ACB) triggered an increase in CAN share price. Primarily, because CAN is partnered with Aurora. However, Coca Cola denied the rumours. Making this price-sensitive event superficial.

PSE two: CAN commences commercialisation of medicinal cannabis – 7th January 2020

CAN’s joint announcement with IDT Australia Limited (ASX: IDT), on the extraction of cannabis resin triggered stock growth. The end result of the extracted resin is the production of Good Manufacturing Practice (GMP) Cannabis products.

However, before market release the CBD products will undergo stability testing in late March of 2020. Cann Group’s distribution agreement with Symbion Health ensures an extensive supply of the CBD products to the Australian market.

Moreover, CEO Peter Crock highlighted the company’s intention to distribute their medicinal cannabis through the Special Access Scheme (SAS) and even export. In turn, the commencement of the extraction program illustrated CAN’s ability to generate revenue sooner. Thus, causing CAN’s stock price to surge.

Does CAN’s increase make it a possible investment for 2020?

Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.

For short term investors,we believe CAN may not be a wise investment. Primarily because the short term price of the stock is unpredictable. Meaning if you invest now, there is the possibility that the share price does not rise in the upcoming months. However, this is based upon YIG research and you must always conduct your own before entering any market.

However, for long term investors CAN may hold some potential in the long run. However, when investing long term you must make a calculated decision if the risk is worth it which can be measured through beta and calculated un-systematic risk.

Systematic,Unsystematic Risk and Beta meaning

First, the recent manufacturing progress provides potential for future stock and revenue growth. Especially as Simply wall Street Quote CAN as 87.6% undervalued. Thus, forecasting a gradual growth in share price over 2020.

Second, CAN’s share price will surge higher when stage 1 of the Mildura facility is completed in Q3/Q4 of 2020 (Is it worth shutting the gate on CAN). Thus, making a price range of $1.55-$1.65 possibly a good entry point. In which investors could hold until the end of the year.

If you want to understand the bearish cannabis market of 2019 then click here – Or If do you want to discover what the hot cannabis stocks for 2020 are: Ecofibre ltd and ECS Botanics Holdings Ltd (ECS).

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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

Written by Patrick McLoughlin, Associate of YIG.

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