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The stock market ended the day mixed after the Fed released remarks from its monetary policy meeting.
Today’s market indices ended the day mixed.
The DOW Jones was down, while the S&P 500 finished in the red by a hair. The NASDAQ managed to stay in the green. This comes after a statement by the Federal Reserve confirming that the economy has shown great improvement. Chair Jerome Powell emphasized that the Fed is not planning on pulling back its favorable money policies until the nation was sustainably back on track. Some investors are growing impatient that the Fed is not addressing the rising inflation as a challenge and keeps its policies. That's most likely what contributed to the market's mixed results.
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WHAT'S UP WITH MJ?
Tilray (TLRY) earnings boost marijuana stocks and give a positive outlook for the industry.
Today, several cannabis stocks showed up on the winners' list. I typed in "cannabis" in the search bar, and the cannabis (marijuana) collection on Stock Card is registering all green. Marijuana stocks have declined all year since the retail-fueled trading frenzy earlier in 2021 with other meme stocks. Why are cannabis stocks suddenly rocketing?
The industry has struggled with COVID shutdowns and closing dispensaries, where customers are more likely to spend money on more expensive products than shopping online. This was Tilray’s (TLRY) response to slightly underwhelming revenue during its earnings call yesterday. The stock is up over 25% today for its positive results. Tilray showed a 27% increase in revenue year-over-year, with a 55% growth in cannabis revenue specifically. The company operates mainly in the Canadian market but has branched out to Europe with its merger this May with Aphria. Aphria was operating in the same industry but making most of its revenue from its branch in the German medical marijuana market.
Despite COVID challenges, the positive outlook by Tilray boosted several marijuana stocks higher today. Growth is on the horizon for companies on both sides of the border. In the U.S., statistics show that nationwide cannabis sales increased 67% in 2020, while 12% of Americans are active marijuana users. With more states legalizing it by the day, the market is ever-growing. Not a surprise to see investors are digging marijuana stocks once again.
REVISITING AN MJ STOCK
Canopy Growth (CGC) refocuses on profitability and free cash flow while the outlook on American legalization remains fuzzy.
Yesterday a fellow Stock Cardian, Robert Milling, asked me whether it's time to buy CGC now that the price is lower than what I paid for it. I own Canopy Growth Corp (CGC) in my portfolio and have kept that as my foot in the industry's door. I also picked it because it is one of the well-funded companies in that sector. Robert made me go back and see what's going on with CGC.
Canopy Growth Corp (CGC) is operating in Canada like Tilray and holds licenses to distribute medical marijuana products in over twelve other countries. The company has been rapidly expanding in the Canadian market, but it is still losing money each year. Profitability is one reason the company has been cutting some celebrity partnerships. If you take a look at the company’s Stock Card, you’ll find that it has a great outlook on industry growth, and its sales revenue has been on a promising upward trend for a while. My strategy to keep a foot in the door still applies as CGC continues to focus on growth and profitability.
The risk I'm taking with CGC is still quite high. While the industry has seen plenty of growth in states and countries where marijuana has been legalized, there’s still quite a ways to go.Accordingly to Wikipedia, only two countries, Canada and Uruguay, have fully legalized commercial activities nationwide. More countries have legalized recreational or medical use, but full commercialization is still just beginning. In the U.S., a new bill has been introduced to the Senate for the federal legalization of marijuana. The time it will take to reach that point is anybody’s guess. Marijuana investors need to be patient and master their emotions during market volatility.
The steep losses this year do present a buying opportunity if you want to take a long position on a marijuana stock but prepare to hold through some major volatility over the coming years from the U.S. market. CGC or Tilray either can be a good one to consider, you may also take a look at marijuana-focused ETFs such as MJ, although I haven’t yet looked at the ETFs in detail.
Check out Paul Essen’s portfolio, our featured investor and partner of the week.
Okay, let's wrap up by stopping by Paul Essen's portfolio. You can find it on Stock Card's Stock Picks page. Paul and his Freedom portfolio are the Featured investor and partner of the week. He is one of the best long-term investors I like to follow on Stock Card. He and I had a chat about his investment strategy earlier this week. I’ll leave a link to that conversation in the show notes. Drop by Pauls' Freedom portfolio and follow him to get notified of his buys and sells.
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