Sell HEXO (HEXO)
Last week there was no Cabot Marijuana Investor update, and I apologize to those readers who expected one and were disappointed. Officially, there is no update schedule; my goal is to give you whatever’s needed whenever it’s needed. But I’ve got into the habit of doing updates on Wednesdays, and a lot of readers have got into the habit of expecting them. Last week, however, there was no news and no change in my advice, so no update.
Today is different. Today we have to process—and perhaps respond to—the market’s big drop on Monday, when the Dow was down 2.1%, and other indexes somewhat less.
Technically, as explained above, I could have done an update yesterday—or even Monday, as things were falling apart. But I’ve learned that more often than not, it’s better to take time to let the smoke clear. Keep the main trends in mind. And then, just maybe, take some action.
Looking at the charts today, as the market has bounced in the two days since Monday, here’s what I see.
Our worst-looking stocks are Canopy Growth (CGC) and HEXO (HEXO). Both are Canadian and investors are still avoiding Canadian marijuana stocks. We have a big long-term profit in CGC, and good reasons to hold long term, but HEXO is our biggest loser—and also our most recent buy, and thus the easiest one to sell. Out it goes.
Among the other stocks, a large number have just fallen below their March-April lows and rebounded back above those levels—a pattern we sometimes call a Final Fakeout, as it has tricked investors into selling near the exact low. If you’ve got one of those, I recommend holding on.
But the best stocks—and these are the ones you should truly be focusing on (and perhaps buying today)—have not fallen below their recent lows. Among them are Innovative Industrial Properties (IIPR), our REIT, which is the most conservative holding in the portfolio, GrowGeneration (GRWG), our hydroponic supply retailer, and Green Thumb (GTBIF)—which is our second-largest holding. It’s the strongest true marijuana stock and thus an attractive buy.
Fundamentally, I’m eagerly awaiting the second quarter earnings reports that will start arriving soon. I expect to see continued rapid revenue growth among our stocks and even some positive earnings; both will give us confidence to continue holding.
In the meantime, next Wednesday I’ll give you a full rundown on all the stocks in our regular issue.