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.
The cannabis industry evokes both unprecedented excitement and frustration in investors. Let me take you through the cannabis story. We first flashback to 2017 and 2018 where the industry was in a frenzy. Cannabis stocks began appearing left right and centre. The potential eye-watering returns saw investors rally behind these pot stocks. Resulting in endless stocks hitting record highs. However, in 2019 the fear that companies had an oversupply of cannabis while the industry was slow to take off, spread. Causing investors to sell their shares. Resulting in the bearish cannabis crisis of 2019.
Don’t’ get me wrong the cannabis industry is exciting and an intriguing market. However, navigating yourself through the cannabis industry is like a minefield. Meaning cannabis stocks can unexpectedly crash at any moment. Youth Investment Group is here to provide a balanced perspective on the cannabis industry so that you are not misled by biased pot stocks.
Winners of the 2020 Cannabis market so far
The first winner is Ecofibre Ltd (ASX: EOF). EOF is up since the 2nd of January 2020. Why are investors rallying behind EOF?
First, Ecofibre displays some of the best financials in the industry. EOF transformed a $0.4 million loss into a $7.1 million profit gain over H1 2020. Moreover, revenue continues to climb as EOF reported a 118% increase, totalling $29 million H1 2020. Record sales highs from Anada Health and Anada food have been driving financial health.
Moreover, with EOF’s subsidiary HEMP BLACK commercialising products in early mid-2020 the cannabis stock is becoming even more attractive.
However, in my opinion, I would first look into the impact of EOF’s dilution of shares and high noncash earnings on profitability.
The second winner is Cann Group Ltd (ASX: CAN). CAN are up 51% since the 2nd of January 2020. Investors are confident in CAN for two reasons.
On the 7th Jan CAN announced its preparation to commercialise medical cannabis. Which involved cooperation with IDT Australia Limited (ASX: IDT) to extract cannabis resin. The extracted resin will aid the production of Good Manifesting cannabis products. The commercialisation equates to future revenue. Resulting in investors driving up the stock price.
Moreover, CAN reset their market focus considering the current oversupply of cannabis while the industry is still slow to take off. CAN will still produce GMP cannabis for the Australian demand but develop export pathways. The market update restores investors faith in the survival of CAN.
Losers of the 2020 cannabis market so far
- Elixinol Global (ASX: EXL). EXL is down 1.72% since the 2nd of January 2020. To add insult to injury EXL is trading at an 80% decrease YTD. Meaning the company will need a bank of impressive price-sensitive announcements to get back to its $5.69 high in April.
- Botanix Pharmaceuticals (ASX: BOT). BOT Is down 70% since its 0.027 cents high in September. The downward trend is expected to continue unless BOT can turn their statistically insignificant US acne results into a success, with their stage 3 trials in 2020.
Why not broaden your knowledge on the cannabis market by reading why Ecofibre (ASX: EOF) and Cann Group Ltd (ASX: CAN) are becoming the emerging leaders? Also, find out why these three hidden cannabis stocks hold upside potential Creso Pharma (ASX: CPH) , ECS holdings Ltd (ASX :ECS) and AusCann (ASX: AC8).
Here is our free, uncomplicated, and extensive ASX portfolio
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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.