Tesla and Pot Stocks (Not the Same Thing)

by JDH on October 6, 2018

My comments on Tesla will be brief.  Last week I asked if this was the end for Tesla; it’s not, yet, but the end is getting closer.  Tesla closed the week at $262, so after ramping to $316 on word of a settlement with the SEC, it’s back down, because Elon Musk can’t stop sending out angry tweets.  There is now a chance that the SEC will rescind their settlement and impose a greater penalty, in which case Tesla is done.

I currently have no position, because I don’t like riding roller coasters, but if it has another crazy ramp to the $300 level I will likely short again.

Of more interest is the Canadian pot stocks.

My favorite is TGOD.TO – The Green Organic Dutchman Holdings Ltd.  They did their IPO in the spring at $3.50, and spiked all the way to $10 in September, before correcting back to $6 this week.  There are two upcoming events to watch:

First, on October 17, marijuana becomes legal, sort of, in Canada.  In Ontario the pot stores won’t be fully operational until April 2019, so I don’t expect a big initial spike in demand, but that’s a milestone to watch for.  It could be a “buy on rumor, sell on news” deal, where everyone sells on October 17, now that the event has occurred.  I suspect that once it is legal, institutional and private investors who didn’t buy it because it was illegal may change their minds and get into it.

Second, when TGOD did it’s IPO it’s initial investors were subject to a six month hold period, which expires on November 2.  Some of those investors bought their shares as low as 50 cents, so they are now sitting on a sizeable gain, and it would be prudent for them to sell at least a portion of their holdings to lock in their gains.

So, I think between $5 and $6 TGOD is a buy, and it’s a sell at $10.  That’s how I’m playing it.  I have a sizeable position, so I don’t play to buy more.  I will likely hold into December or January depending on price action.

I also like the following:

  • Aurora ACB.TO
  • Canopy WEED.TO
  • Emblem EMC.V
  • Organigram OGI.V

The plan with the above is the same; ride them past legalization, and when the RSI gets really high, start selling.

Is the top behind us?  Perhaps, but I think there is a lot of room left to run, as mutual funds get into this game, so for now I’m riding the wave.

Thanks for reading, and happy Canadian Thanksgiving.