Nanalyze

WARNING – Don’t Buy Cannabis Stocks!

In a recent article titled “No to Marijuana Stocks, Yes to Weed Investing“, we advised investors to stay well clear of any over-the-counter (OTC) “cannabis stocks” as they are most likely all scams. Don’t believe us? Even FINRA warned specifically against investing in OTC cannabis stocks:

Marijuana Stock Scams Update: In early January 2014, new laws regarding the legalization of marijuana for medical and recreational purposes went into effect in a number of states. At the same time, media coverage of the issue increased, as did investor interest in shares of marijuana-related companies. In some cases, volumes for the stock of otherwise thinly traded, marijuana-related companies increased dramatically—and prices became quite volatile. In May 2014, the SEC issued an alert and accompanying trading suspensions for numerous companies that claim their operations relate to the marijuana industry.
http://www.finra.org/investors/alerts/marijuana-stock-scams

Given the stoned populace that now wants to “invest in weed legalization man”, it’s very easy for these OTC companies to present a compelling case for their “cannabis stocks” given the lack of investing acumen in most of the people interested. Not to mention, they’re probably baked out of their gourds half the time. The truth is, there are many cannabis stock scams out there  alongside of legitimate cannabis stocks like Aphria and Canopy Growth which are selling tons of medical marijuana to “patients” across Canada.

A half-baked article was published by Benzinga a few days ago titled “6 Weed Stocks That Aren’t Penny Stocks“. Based on the fact that it was published one day before 4/20, we’re not guessing the author knows that much about cannabis. Here’s an excerpt from that article:

Although investing in stocks that trade off of the major exchanges is always a risky proposition, here are six marijuana stocks that at least (for now) have avoided “penny stock” status by maintaining share prices above $1.

1. GW Pharmaceuticals (NASDAQ:GWPH)
2. Zoned Properties Inc (OTC: ZDPY)
3. AeroGrow International, Inc. (OTC: AERO)
4. Cannabis Sativa Inc (OTC: CBDS)
5. CANOPY GROWTH CORP COM NPV (OTC: TWMJF)
6. General Cannabis Corp (OTC: CANN)

Just because these stock prices are expressed in dollars does not mean they are safe at all to invest in. Any “penny stock” can express their price in dollars by performing a reverse split. If you believe that article and invest in OTC stocks because they’re over $1 a share, you should just roll your money up and light it on fire. The warmth you get from that fire will be of more value than the eventual value of those OTC shares in the majority of cases. A chronic problem that exists on the OTC exchange is that of incompetent management teams and pump-and-dumps. Don’t take a hit by investing in these duds. The jury remains out on GW Pharmaceuticals (NASDAQ:GWPH) which is traded on NASDAQ and has a market cap of $1.8 billion. Canopy Growth is also trading on a major exchange now and is legitimate. Also check out Aphria which we wrote about that is also legitimate and the lowest cost producer we know of.

Cannabis as an investment theme is a very viable one. Even Peter Thiel’s Founders Fund is investing in this space. With decriminalization in effect in the U.S., cannabis is gradually losing the stigma associated with it and investors see this trend. The great team over at CB Insights published their newsletter today wishing everyone a happy 420 day and exhaled the below pictorial which shows just how popular cannabis startups have become:

Cannabis_Companies

On a side note, we grew up thinking that 420 originated from a police code for homicide. While that’s partially true, it actually originated from some high school students in San Rafael back in the 1970s. Who knew eh? Anyways, what were we talking about? Oh yeah, investing in weed.

So according to CB Insights, cannabis startups raised over $213 million in 2015 with deals hitting a new high in Q4 2015. With over 50 companies in this space, some of these names are just dank. “Nugg” and “Speedweed” will deliver some buds to your door when you’re craving. “Kind” helps your weed themed business venture to stay in compliance with the law. “CannabisNow” and “Merry Jane” (get it?) provide your weed news as it breaks. Given the target consumer profile, having a memorable name for your cannabis startup is key here.

With at least private 50 companies sprouting up like weeds in the cannabis space, there will certainly be opportunities to invest in the future for retail investors. In the meantime, there are probably 100s of OTC companies, trading in pennies or dollars per share, that claim to be viable ways to invest in the future of cannabis. Don’t invest in them! Instead, just keep reading Nanalyze and we’ll steer you clear of all the traps out there and make sure you’re kept up to date on the first cannabis IPO that gets passed our way along with legitimate cannabis stocks we come across.

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  • fuku

    CGC +50% up and on TSX now. This was shitty article

    • true

      lol

      • Nanalyze

        So much for an informed debate.

        Did you care to elaborate on what parts of this article you disagreed with?

        • mat

          How about the fact that cannibas stocks are up 2x – 3x since this article was written. So glad I didn’t listen…made over $50k investing in them! HAHA, smoke em if you got em!

  • James P Simpson

    Totally missed the mark on this one bud. Back to class for you.

    • Nanalyze

      Hi James.

      Do you care to elaborate on your comment or is that asking too much?

      • Adam

        The heading of your article is “don’t buy Cananbis stocks”. Guess what? Cannabis stocks have had a great run the last month and anyone who listened to your article may have missed that investment opportunity.

        Stupid article, poorly written, and totally bad advice. Penny stocks in general are often shitty, but people like you shouldn’t put to stupid advice like this.

        • Nanalyze

          Thank you for your comment Adam.

          The article, just like your comment, was an opinion (not advice as you put it). There is an incredibly large number of scams in marijuana stocks as the U.S. government (FINRA) warned against and as we warned against. With the exception of stocks we highlight, we advise against buying “cannabis stocks” for these reasons.

  • pistons

    Absurd article. Internet trash. You are portraying your own views on marijuana and the industry and in no way shape or form are offering true investing advice or even information. I am a professional trader and made a decision to buy one of the aforementioned cannabis stocks based on technical analysis and studying the price action. Turned out to be one very nice trade.

    On another note your offering of investing in PRE IPO stocks sounds quite fishy and scam- like and I would not recommend investing with this company without your own thorough investigation.

    Side Note: GWPH is a pharmaceutical company.

    • pistons

      wasnt done…. You can find out if a stock has had a price split as well as do your own due diligence regarding any stock you choose to invest in.

      I agree that any OTC stocks should be looked at with more scrutiny than those that trade on the NASDAQ.

    • Nanalyze

      You are a speculative trader, not an investor. It’s no surprise that you didn’t like that article because it was written for investors.

      We agree with you. In no shape or form are we giving investment advice. We are pointing out that the SEC says this space is RIFE with scams. There are also many promising startups that are not scams.

      As for buying pre-IPO shares using Motif Investing, you should know that Motif Investing is backed by Goldman Sachs, JP Morgan Chase, and many others. Note that it is a platform that caters to investors, not speculators.

      • pistons

        As I said I made my decision based off technical analysis and price action. There was no speculation involved. Perhaps Motif is backed and trustworthy but I would still advise people to do their due diligence. For a company involved with such notorious banks it is even more concerning the views on investing, stocks, markets, and industries presented in this article.

        Also I’m not surprised you called me a speculator, you have done a nice job of rudely answering every comment on this board.

        • pistons

          So as far as Motif goes, everything I have seen on this one page shows that Motif might not be a very trustworthy source. Maybe it is just YOU making a good company look bad.

          • Nanalyze

            We use Motif Investing and love it. Of course you should research every broker to make sure you’re comfortable with them. A good place to start is looking at who is backing them and how much money they’ve taken in:

            https://www.crunchbase.com/organization/motif-investing

        • Nanalyze

          TA is placed right in the realm of speculation based on the principles of investment management.

          Yes, you are right that people should always do their own dd in regards to everything relating to investing.

          There is nothing wrong at all with being speculator. It just happens to be something we don’t write about.

          Your views are always welcomed and we appreciate your feedback!

    • Coo li
  • Deto Dog

    You are way, way off. Scams exist in every industry but MJ has many great startups and BILLIONS in future income. So far, my Canopy has matched my Tesla and Apple gains so I’m impressed.

    • Nanalyze

      Thanks for the comment! Pointing to “gains” says nothing about whether or not a stock is a pump-and-dump scam.

      We’ll do a future article on Canopy since it seems to be of interest to people and now it is off the OTC exchange.

      Yes, MJ has many great startups which we pointed out.

      When FINRA specifically warns about the massive amount of scams in the MJ industry, it pays to stay away from OTC stocks unless you enjoy speculating.

  • Nanalyze

    Here’s a follow up article on CGC. Thanks for pointing out their move to TSX!

    https://www.nanalyze.com/2016/11/marijuana-stock/

    They are now the only marijuana stock publicly traded on a major exchange.

  • Matt

    What a joke of an article. No bias here….

    “selling tons of medical marijuana to “patients” across Canada.”

    “A half-baked article “

    • Nanalyze

      We always welcome feedback Matt. Do you want to elaborate on your comment?

  • Matt stone

    I agree OTC stocks are scams but I bank pretty hard….charts, tech analysis.. Its very easy to make over 300% in a couple days….I use ihub and many traders exchange tickers with each other there. I’ve banked on extreme scams and marijuana plays. They key is the share structure, how much toxic debt is out there…what is the AS, OS…is there any convertible debt hitting the market etc….buy low sell high….400% on uamm, 150% on owcp 1000% on cgc I’ve own since the bedrocan days …I don’t buy blah Walmart , proctor and gamble blue chips …I want my 300%…I self taught myself and I’m proud that will be quitting my job soon…..ironically I’ll buy some blue chip tickers after a market crash to get some guaranteed returns….I’m loaded now so I can gamble on crappy and also by safe have blue chip plays…. The key is gamble on tickers the have massive upside while you are young to get ahead….if your aren’t rich there’s no need to buy blue chippers…

    • Nanalyze

      Hi Matt,

      Blue chips are not “guaranteed returns” but they are more stable and predictable than swing trading OTC stocks. It is but a very small percentage of people that accomplish what you are saying. Your below sentence says it all:

      The key is gamble on tickers the have massive upside while you are young to get ahead….if your aren’t rich there’s no need to buy blue chippers

      Yes, it is indeed gambling. And those people who are rich most likely came about that wealth through “boring” blue chips!

  • Hi there, Uk based here, interested in investing long term, any ideas, which ones and where to buy ect?
    many thanks

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