Cannabis Investing Requires Due Diligence

10/26/2015 10:27 am EST

Focus: STOCKS

Michael Berger

President & Founder, Technical420.com

The cannabis stock market has been in the midst of a sell-off and investors are desperately trying to find long-term value plays, so Michael Berger, of Technical420.com, highlights three cannabis stocks he believes are long-term investment opportunities.

There are more than 300 publicly traded cannabis companies and most of them will dissolve or shut down over the next two years. Since the emergence of the cannabis industry has created opportunities for fraudsters, investors need to do their due diligence before investing in a cannabis company. Investors need to evaluate the source of information before acting on it.

Let’s be real, you’re not investing in a value stock.

First things first, you are investing in developmental companies that are naturally speculative in nature. However, with big risk comes big reward. For the investors who believe in this industry and can stomach the risk, the number one thing I can recommend is to be selective and look extensively into the company prior to investing. We recommend carefully considering factors such as:

  • What exchange does the company trade on?
  • How many shares are outstanding and what is the company’s dilution potential?
  • Who makes up the company’s executive board and what is their track record?
  • Is the company generating revenue?
  • Is the company taking steps to capitalize on growth opportunities?

Where Investors Can Find Value

The cannabis stock market has been in the midst of a sell-off and investors are desperately trying to find long-term value plays. We want to highlight three cannabis stocks which we believe are long-term investment opportunities.

MassRoots (MSRT)

While MSRT is more risky than GWPH and INSY, the company possesses significant upside due its rapidly growing user base of cannabis consumers and businesses. Although MSRT has come down from its recent highs, shares are up more than 45% during the last three months. The market is waiting to hear back from the Nasdaq in regards to MSRT’s application and we expect to see shares rally significantly higher if approved.

Canopy Growth Corp (TSV: CGC)

Technical420 is increasingly favorable on CGC following the election of Justin Trudeau. While the Canadian marijuana market is much smaller than the United States market, CGC continues to gain market share. An unexpected catalyst for CGC would be the entrance into the United States market. While this is pure speculation, we think it is possible due to the company’s success from a compliance standpoint. CGC is up more than 29% during the last month and Technical420 recently exited and re-entered into CGC.

Monarch America (BTFL)

Although this is by far the most risky of the listed stocks, we see the most upside with BTFL. While the company continues to execute on initiatives, market sentiment remains negative. BTFL is the only company to crack the Native American cannabis industry and we view this as a very unique advantage for shares. Shares are down more than 87% during 2015 and we believe that the market significantly undervalues the long-term potential.

To learn more about these companies, attend the free Cannabis Investing Symposium on October 30, 2015. Click here to register for free!

All opinions expressed in this article are the opinions of Technical420 LLC and are no way affiliated with the MoneyShow. Neither Michael Berger, nor Technical420 owns shares in any of the companies listed in this article and has no plans to create a position in any of the listed securities.

Michael Berger, Founder and President, Technical420.com

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