Boy wasn’t the ASX a bumpy ride this week. The market started strong with Monday and Tuesday showing signs of a recovery. However, the comeback was short-lived as Wednesday and Friday continued the bearish trend.
After closing 2.81% lower for the week it seems the Coronavirus fear is not going away anytime soon. Especially as the number of Coronavirus cases crossed 100,000 yesterday.
Amidst all the pessimism, most ASX cannabis stocks are up. Just listen to these returns
- AusCann (ASX:AC8) up 11.90%
- MMJ holdings (ASX: MMJ) up 20.6%
- Botanix Pharmaceuticals (ASX:BOT) up 16.90%
- Elixinol Global (ASX: EXL) up 11.11%
- Cann Group (ASX: CAN) up 12.5%
- Althea Group (ASX: AGH) up 16.7%
- Creso Pharma (ASX : CPH) up 8.33%
Yes, that is correct, cannabis stocks are up while the coronavirus fears continue to wreaks havoc on the stock market.
Today we are discussing why cannabis stocks are up for the week, which pot stocks experienced the most growth and whether the party will continue into next week ?
So why are Cannabis stocks up?
I do not believe cannabis stocks surged because of the coronavirus panic. Especially as no scientific evidence supports the claim that cannabis is a cure for the coronavirus.
Instead, cannabis stocks climbed throughout the week for two reasons.
Firstly, most cannabis stocks released their H1 financials over the past fortnight. Secondly, the coronavirus fear drove down cannabis stocks to record lows last week. In turn, opportunistic investors bought in at a low price on Monday, ultimately driving up the price.
An example of a cannabis stock that surged this week
Althea Group Holdings (ASX:AGH)
AGH’s H1 financials, Global development and low price caused a 17% increase over the week.
Althea reported revenue growth of 963%, totalling $1.85 million. Illustrating the success in AGH’s cannabis products across Australia, the UK and Germany. Moreover, cash and cash equivalents skyrocketed by 50% over the past 6 months, totalling $22,361,000 million. Despite reporting an earnings loss of $8,351,000 AGH’s revenue and cash growth demonstrated growth.
Althea prescribed 4108 Australian patients with medical cannabis products. Which was 108 above its Australian target. Patient growth results in AGH expecting profitability from the Australian sector within 6 months.
Moreover, AGH prescribed 88 patients in the UK between June -December. Althea blamed the slow growth on Brexit. However, with Brexit being confirmed AGH expect UK patient prescriptions to increase.
On the back of AGH’s global distribution and H1 financials, the company was trading at 0.24 cents (Monday 2nd March). Which is an 80% decline since Althea’s high back in July 2019. In turn, opportunistic investors snapped up discounted AGH shares.
Can the Cannabis surge continue next week ?
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 short answer is probably not. Investors seized the opportunity to purchase cannabis stocks at a discounted price at the start of the week. Meaning the short term gains have probably already been made by now.
Instead, I would personally look into hand sanitiser stocks and companies developing a cure for the vaccine. Why ? “Because if we think logically, the coronavirus epidemic will be solved through 1) a vaccine cure and 2) If everybody who is not infected maintains an excellent level of hygiene”.
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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