Marijuana Stocks

Is the Marijuana Bear Market Over?

Few people cheer for the bears… especially if you’re from Green Bay.

But during the past century of trading, investors have been hit with more than 30 bear markets.

Pot stock investors in particular have endured several bear markets already. And we’ve been slogging through the longest one in the sector’s nascent history.

But if those bears start to point to a pattern we can profit from, that might be something worth cheering for…

Chart - North American Marijuana Index

Since March 2017, the North American Marijuana Index is up 26.3%.

That’s not bad… but it’s not great either.

That means pot stocks have returned roughly the same as the Dow Jones Industrial Average and the S&P 500 over those 2 1/2 years. And the index trails the Nasdaq by essentially a dozen percentage points since March 2017.

Looking at this chart, we see that the sector has been pummeled by five bear markets since March 2017.

But, importantly, a pattern is starting to emerge. Let me show you:

  • April 10, 2017, to August 22, 2017: The North American Marijuana Index fell 31.82%.
  • January 8, 2018, to April 9, 2018: Pot stocks fell 39.2%.
  • June 21, 2018, to August 14, 2018: The North American cannabis benchmark lost 27.53%.
  • October 15, 2018, to December 21, 2018: The index tumbled 46.49%.
  • March 21, 2019, to August 27, 2019: The North American Marijuana Index shed 40.1%.

So, of those five bear markets (including the one we’re currently in), the index hit lows in August three times.

Now, anybody who deals with data will tell you a list of only five data points isn’t going to cut it. It’s not definitive.

But I do find it interesting that we are starting to see a pattern emerge.

Right now, we’re stuck in marijuana’s longest-ever bear market. But if history is our guide, we may have seen the bottom, as well as the beginning of a new uptrend.

The High Five

Below are this week’s High Five, where – each Monday – I cover the five pot stocks I believe will make major moves – up or down – in the week ahead.

1) Aurora Cannabis (NYSE: ACB) will report fourth quarter earnings after the closing bell on Wednesday.

Wall Street is looking for revenue to skyrocket 465.6% to $82.24 million with a loss of $0.03 per share. That would be smaller than the $0.11 loss it reported a year ago.

Shares of Aurora are up more than 16% so far in 2019. But they’ve fallen more than 38% from their peak in mid-March.

2) Planet 13 Holdings (OTC: PLNHF) welcomed more than 2,000 customers per day to its SuperStore entertainment complex in August. And customers spent an average of $90.

Amazingly, the company’s SuperStore accounts for 10% of all dispensary sales in Nevada.

Planet 13 also announced on Friday that Cannabition – a cannabis-themed immersive art museum – will be leasing space at the SuperStore.

Shares have gained more than 80% in 2019. But they slid nearly 22% since their peak in late April.

3) Innovative Industrial Properties (NYSE: IIPR) shares have been dropping like a stone in recent days.

On August 13, The Cannabis ETF (NYSE: THCX) dropped the real estate investment trust from its holdings. But the drop in Innovative Industrial really began at the end of August after it filed a $250 million Form S-3 and a Notice of Effectiveness. This sparked panic about dilution.

The company should provide its third quarter dividend announcement this week. And that will spark a move in shares.

4) Khiron Life Sciences Corp. (OTC: KHRNF) will be presenting at the Cannabis Industry Virtual Investor Conference on Thursday. The Latin American cannabis producer has been making one headline move after another over the past month.

Plus, Khiron President Chris Naprawa is my guest on CannaBiz Now! this Thursday.

Shares are up almost 18% year to date. But they’ve tumbled nearly 60% from their peak in February.

5) Plus Products (OTC: PLPRF) shares are up single digits in 2019. But like so many other pot stocks, it’s shed more than 40% of its value from its year-to-date highs.

The California gummies company recently announced second quarter revenue increased 125% to $3.6 million.

But it has two important events on the horizon. It will present at the Cannabis Industry Virtual Investor Conference on Thursday. Then it will host a launch event in New York on September 17.

As always, we like to compare the performance of our High Five with the benchmark Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF).

As we inch closer to the final quarter of the year – and the possibility we may have just hit the end of the bear market – I wanted to look at how this week’s High Five have done so far in 2019…

Chart - The High Five

We can see that the cannabis benchmark is up a little more than 10% year to date. And only Plus Products is lagging the ETF.

After a couple of strong days, it’s too early to say the worst is over. But I do take some comfort – and investors should too – that for the third August in a row, the North American Marijuana Index has struck lows… and then has bounced higher.

I’ve made my career trading trends. And I’m thankful that we now have multiple years of trading data to start seeing a pattern emerge.

If you have a pot stock in mind that you’d like me to discuss here, leave a comment below.

Here’s to high returns,

Matthew


About

Matthew’s expertise ranges from classic industries such as oil and mining to cutting-edge markets like small cap tech, cannabis, 3D printing and cloud computing. With almost two decades of financial experience under his belt, Matthew’s knack for finding market trends never fails to surprise us, which is why we keep a close eye on his free e-letter, Profit Trends.

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