One of the many market aphorisms that float around in my head says, “Never sell a dull market short.” It reminds us that in theory, low volume and calm trading ranges such as we’ve seen in the cannabis sector recently tend to signify a balance of buying and selling pressures, and thus a likelihood, particularly after the previous one-year decline, that the dullness will soon be replaced by a new uptrend.
So I’m ready to make money.
But I’m skeptical that we can get a true uptrend without the participation of the broad market, which is now officially in a correction.
Yet I’m patient, because I truly believe the stocks in this sector have fallen far enough.
And I’m optimistic that fourth-quarter reports, which should begin trickling out in a couple of weeks, will spark new buying, particularly of the stocks with the greatest growth metrics.
So I’m sitting tight with our portfolio, which is currently 25% in cash.
But if you’re in the mood for buying, the three stocks that I would consider today are these:
Cresco Labs (CRLBF)
It’s the cheapest of the big five on a price/sales basis, and the way its chart failed to close below support at 6 in the face of the recent growth stock weakness reveals lurking buying power.
Curaleaf (CURLF)
It’s the leader by sales volume (and some analysts expect it to stay the leader in 2022, though a competitor’s acquisition could change that), and its growth rate (74% in the third quarter) is second fastest of the big five.
Verano (VRNOF)
It’s the fastest growing of the big five (106% in the third quarter), and its chart shows both youth (public less than a year, so more potential buyers than sellers) and resilience (it’s found support repeatedly at the 10 level since early October).
Risk-tolerant investors might do well with these, but I’m happy sitting with 25% cash, waiting to see who the leaders of the next advance will be.
Your full monthly issue of Cabot SX Cannabis Advisor will be published next Wednesday.