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Discussion Starter #201 (Edited)
That makes sense AltaRed. It may not be a crazy idea to start easing into a long position. One could do the same in energy; both HMMJ and XEG have really been beaten up.

HMMJ is truly crashing these days, with some nice big moves down. Perhaps a few more weeks like this (absolute crash mode) into year end, could present a nice opportunity to open a small long position. I also recommend monitoring its AUM. You want to see capitulation and investors fleeing in disgust.

With XEG, the pain and disgust (and truckers rallies) are already there, so it may actually be time to buy.

Personally, I don't have any room for sector-specific bets in my asset allocation so I won't be doing anything with either, despite the temptation. I have sometimes thought that perhaps I should start a speculative strategy where I do this kind of thing, but I already have too many strategies in play right now. Sticking with my existing plans, I will not do any sector speculation.
 

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Canopy Growth grew 80,000 kilograms of weed in the last 6 months worth close to $500M and barely sold 25% of it. That would be a disaster in most industries. But they also have $2.7B in cash, almost 40% of their market cap, so if they show a trend towards becoming cash flow and EBITDA positive, that would be when investors start to value the stock higher.
 

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With XEG, the pain and disgust (and truckers rallies) are already there, so it may actually be time to buy.
I think it is too early for XEG but XEG isn't going to respond the same way as HMMJ when SU and CNQ make up almost 54% of the ETF. They are holding their own and upside will be limited to perhaps 20%. Even CVE, IMO and HSE with their refining components won't do a double. Its the VET, BTE, CPG and other constituents of the ETF that are still sliding and could, in theory, go bankrupt before new pipeline capacity comes on in late 2021 or early 2022. Perhaps XEG gets back to circa $13-15 eventually from about $9 today. Is the potential for a 50% gain long term worth the risk starting an entry position today?
 

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Discussion Starter #204 (Edited)
I think it is too early for XEG but XEG isn't going to respond the same way as HMMJ when SU and CNQ make up almost 54% of the ETF. They are holding their own and upside will be limited to perhaps 20%. Even CVE, IMO and HSE with their refining components won't do a double. Its the VET, BTE, CPG and other constituents of the ETF that are still sliding and could, in theory, go bankrupt before new pipeline capacity comes on in late 2021 or early 2022. Perhaps XEG gets back to circa $13-15 eventually from about $9 today. Is the potential for a 50% gain long term worth the risk starting an entry position today?
That's a good point about the heavy weights that dominate XEG. And bottom fishing is a very dangerous game.

Counter-argument: think about tech (XIT) for a moment. Until just a few years ago, XIT actually had a similar profile: horrible recent returns. Just about nil return back to inception. Chronically poor performer. Dominated by just a couple heavy weights (NT initially, later RIM).

XIT became very unpopular, out of favour. "Why would anyone hold this thing that's basically a bet on RIM?" And then bam... the tech rally started. Even though it used to be lopsided in just one or two heavy constituents, it gained more large caps, became a bit better diversified, and has performed spectacularly. The nice thing about sector indices is that they actually do keep up, gaining more holdings, as money flows into a sector.

Today, XIT is the top performer. It's actually pretty even weight in 4 large caps, much better than it used to be. And nobody invests in it by the way. 10 year CAGR = 15.3% and yet it was so hated, that everyone got out long ago. Even the 15 year CAGR is better than the broad market.

I'm saying that because I don't think someone should dismiss XEG just because it's currently overweight in two companies. Indexes change over time.

Personally I am just sticking with my policy, which is 20% energy within my Canadian equities. That's a constant allocation (equal sector weights) and it means I will likely buy some more SU and ENB in December to get back to my equal sector weight. That's as far as I'm going.
 

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Perhaps. I have trouble seeing what could materially change in XEG composition to make a difference. There is no 'O&G' company, e.g. ECA, CVE, IMO, HSE, that could come out of nowhere to make a material difference to the 2 heavyweights. Capital intensive physical assets have to come from somewhere. That said, if there is a chance of a 50% uplift in 5 years, that is a pretty good CAGR.

Maybe I should take a bet on HMMJ after all before Dec 20th....if it maybe hits $8. Think there is room for a potential double in 5 years if my starting point is $8 or so.
 

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Discussion Starter #206
Geez, I'm tempted to as well. AltaRed how do you "fit" this kind of thing into your investment policy / AA ?

I'm happy to add new things into my policy but I want a framework that prevents me from doing too much ad hoc stuff. Maybe it's time for me to create a speculative, non-AA portfolio.
 

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Geez, I'm tempted to as well. AltaRed how do you "fit" this kind of thing into your investment policy / AA ?
I wouldn't try to it in at all. It would be 'play' money not unlike going on a river cruise. FWIW, it is trading at $8.93 at the moment, down from $10.80 or so 5 trading days ago, albeit that includes a one day major hit. Still, one may not have to wait a month for it to go below $8.

As for share count, I wonder how many shares were out at the peak just over a year ago. Might be interesting to guess how many ETF units might have to be destroyed before it bottoms (destruction adds to price depression).

Added: 44.89 million units as of Dec 31, 2018 per annual report, so interestingly, still above year end 2018.
 

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Discussion Starter #209
Yes just noticed that as well. And earlier in this thread #137 here were unit counts through 2018
Jun 8 - 11.8 million
Nov 7 - 17.3 million
Nov 28 - 20.8 million
Dec 29 - 26.3 million
Jan 5 - 32.2 million
Jan 24 - 36.1 million
Apr 21 - 41.4 million

So based on this, and the current crashy behaviour, I would guess it might be better to wait a little for more redemptions.
 

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I think it is too early for XEG but XEG isn't going to respond the same way as HMMJ when SU and CNQ make up almost 54% of the ETF. They are holding their own and upside will be limited to perhaps 20%. Even CVE, IMO and HSE with their refining components won't do a double. Its the VET, BTE, CPG and other constituents of the ETF that are still sliding and could, in theory, go bankrupt before new pipeline capacity comes on in late 2021 or early 2022. Perhaps XEG gets back to circa $13-15 eventually from about $9 today. Is the potential for a 50% gain long term worth the risk starting an entry position today?
It's those mid-caps that could go bankrupt, yes. Although they could double, triple, or even quadruple. The WCPs, TOGs, SGYs, ARXs, etc. If there was a real big spike in oil to say $75-80, XEG might go up 25-50% or more, but the small companies would be easy 100% doubles and maybe 200%. Even VET was 50% higher just a few months ago.

In any case, those are the type of companies that I'm trading when I do jump into oil on occasion. And oil often bottoms around the mid-late fall.
 

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It's those mid-caps that could go bankrupt, yes. Although they could double, triple, or even quadruple. The WCPs, TOGs, SGYs, ARXs, etc. If there was a real big spike in oil to say $75-80, XEG might go up 25-50% or more, but the small companies would be easy 100% doubles and maybe 200%. Even VET was 50% higher just a few months ago.

In any case, those are the type of companies that I'm trading when I do jump into oil on occasion. And oil often bottoms around the mid-late fall.
VET has far more international exposure than the others you mention. Something like 50% IIRC. pipeline capacity (or lack thereof) affects them far less than the others you mentioned.
 

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VET has far more international exposure than the others you mention. Something like 50% IIRC. pipeline capacity (or lack thereof) affects them far less than the others you mentioned.
That is true, but IIRC, VET damaged themselves by buying AB production that is held hostage by pipeline capacity constraints. That said, I agree VET would be affected less than the mid-caps mentioned by Doctrine. I take no issue with Doctrine's comments and thoughts on the mid-caps. At this point, they are all hanging on and stock prices will vary widely with changes in cash flow due to oil price changes. Assuming no change in WCSB differentials, a drop to $45-50 WTI could kill some of these, while a sustained price above $60 WTI will allow them to jump in price. The Keystone break caused differentials to widen albeit the effect is, will be, short lived. These mid-caps as well as the small caps are all very highly sensitive to cash flow margin. PGF couldn't take it any more so they essentially are giving themselves away rather than ultimately declaring insolvency.

I think money can indeed be made playing 'trades' in this area and Doctrine may have the cajoles to do so, but it is not for weak stomachs. I think I could play it too but I don't want too. I have no desire (and no need) to play when my portfolio already moves up/down every trading day more than I'd make on speculative bets. I imagine Doctrine might keep an ear open to what Eric Nuttal and Josef Schachter do when they spill their guts on BNN, but neither of them have called it right for years now. They are hopeless optimists thinking the bull market in oils started as long ago as 2016 (I think). In any event, there is going to be a lot more pain in mid-cap oils for another year or two UNLESS WTI can sustain itself above $60, and my view is that is very questionable despite what Eric and Josef say. With global growth slowing and considerable new oil coming on stream in 2020, it will be up to Saudi and Russia to discipline themselves to keep oil above $60. The good news is that most OPEC producers and Russia cannot sustain their economies with $50 oil, so they will likely cut back as necessary to try to keep oil prices in the $60 range +/- $5.
 

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VET has far more international exposure than the others you mention. Something like 50% IIRC. pipeline capacity (or lack thereof) affects them far less than the others you mentioned.
VET does have higher international exposure and thus higher prices. It also has more debt and has a payout ratio of roughly double of those others.

There is a lot of potential positive catalysts in the future. Line 3, Line 5, Keystone, TMX, two or three or all could happen in the next 2-3 years. The oil rig count is falling off a cliff in North America at the same time. The last major growth projects are just coming online now with very few new ones planned. Oil consumption might grow for another 20 years.

On the flip side, Venezula and Iran are nearly fully offline and out of export markets. If they came back, there could be a flood. Russia and Saudi Arabia also have spare capacity or at least capacity to invest in growth.

Hard to say. I've traded 2-3 times this year with some good success. Currently out but may come back in, maybe in the next 3-4 weeks. We'll see. There have only been a few new lows in the last few weeks, most stocks bottomed in September.
 

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Geez, I'm tempted to as well. AltaRed how do you "fit" this kind of thing into your investment policy / AA ?

I'm happy to add new things into my policy but I want a framework that prevents me from doing too much ad hoc stuff. Maybe it's time for me to create a speculative, non-AA portfolio.
I notice there's a few new TSX Indexes beginning Monday.

Maybe there will be some new Index ETF's for the Cannabis sector soon.

"The Toronto Stock Exchange (TSX) announced on Friday that two of its three new indexes — the S&P/MX International Cannabis Index and the S&P/TSX Small Cap Select Index — will be released on Nov. 18.

A third new index, the S&P/TSX Cannabis Index, will debut at a future date that has yet to be announced".


ltr
 

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With the drop on Friday, cannabis stocks are now below where I bought them for a trade almost exactly 2 years ago. They are down for exactly the reasons I was sure I was not going to hang around in the sector, i.e. insanely ridiculous oversupply and plummeting prices. It was nice to ride WEED from $20 to $40, but with intraday swings of 20-30%, it was just too much volatility. Of course cannabis stocks continued upwards, but it was inevitable they were going to come down. I believe all of these companies are going to go as low as potentially 50% of book value, which is a common place for distressed stocks in distressed industries to trade (if not lower). Some of these companies have large cash piles (WEED at $2.7B, almost 40% of book), but I believe that will have to be discounted 50% as they will almost certainly burn through half of that in the next year. So, potentially another 30-50% downside for the major companies. Maybe they would be worth a look then.
 

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Discussion Starter #216 (Edited)
Another nice big HMMJ crash today, down 5.7% and shares have been redeemed as well (that figure comes with a lag)

Outstanding Shares: 47,849,210

Appears to be mostly related to ACB totally crashing (down 16% today, or 30% over two days).
 

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The top five Canadian cannabis stocks have seen huge losses.
The Canadian government fails to open up enough stores to meet the demand.

There simply aren’t enough stores. Provinces representing 60% of the Canadian population have only 10% of the stores. So, if there is nowhere to sell consumer products, it’s very difficult to have the type of revenues that everybody expected. But, the positive news, that’s an easy problem to fix. The governments have acknowledged they need more stores. We now have enough supply to allow them to do that and hopefully, we will see that fixed.

https://www.ccn.com/canadian-cannabis-stocks-plummet-government-struggles-demand/

With regulation change, at least in some provinces, they will also lose some of their crowd and buyers. I decided to quit when this became very mainstream. Was also told that there were lots more pesticide in those than I thought at first.

https://www.theglobeandmail.com/news/national/canadians-not-told-about-banned-pesticide-found-in-medical-marijuana-supply/article33443887/

A controversial pesticide banned in Canada has been discovered in products sold by a federally licensed medical marijuana producer, The Globe and Mail has learned, but neither the company nor Health Canada have informed the public.

Myclobutanil, a chemical that is also prohibited for use on legal cannabis in Colorado, Washington and Oregon because of health concerns, was found in product recently recalled by Mettrum Ltd., a Toronto-based medical marijuana company.
 

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The recent uplift over the past week has also resulted in additional HMMJ units, to 48,199,210, so a slight uptick in new money. Keeping myself amused watching this every 2-3 days.
 

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The top five Canadian cannabis stocks have seen huge losses.
The Canadian government fails to open up enough stores to meet the demand.

There simply aren’t enough stores. Provinces representing 60% of the Canadian population have only 10% of the stores. So, if there is nowhere to sell consumer products, it’s very difficult to have the type of revenues that everybody expected. But, the positive news, that’s an easy problem to fix. The governments have acknowledged they need more stores. We now have enough supply to allow them to do that and hopefully, we will see that fixed.

https://www.ccn.com/canadian-cannabis-stocks-plummet-government-struggles-demand/

With regulation change, at least in some provinces, they will also lose some of their crowd and buyers. I decided to quit when this became very mainstream. Was also told that there were lots more pesticide in those than I thought at first.

https://www.theglobeandmail.com/news/national/canadians-not-told-about-banned-pesticide-found-in-medical-marijuana-supply/article33443887/

A controversial pesticide banned in Canada has been discovered in products sold by a federally licensed medical marijuana producer, The Globe and Mail has learned, but neither the company nor Health Canada have informed the public.

Myclobutanil, a chemical that is also prohibited for use on legal cannabis in Colorado, Washington and Oregon because of health concerns, was found in product recently recalled by Mettrum Ltd., a Toronto-based medical marijuana company.
Not too sure if I agree with parts of that. In Alberta, the stores are rarely sold out. Prices are through the roof. 10-15$ a gram. I also don't believe that hoardes of folks are lining up to smoke for the first time. People smoked before legalization. I also think cannabis consumers (new and experienced) have quickly realized that retail pot is a waste of money, compared to methods to legally obtain, such as growing your own, or getting a prescription and getting discount pot (and tax breaks). -- And I'm sure some folks are still buying illegal pot as well.

There was a boom of sales during the opening weeks of legalization, however people have since realized you can do your own grow for well under $1000 and you can produce 0.5 - 1 pound every 12-16 weeks (226g - 454g). With modern lighting, there is far less power consumption, also giving more savings. If you do the math, it makes no sense to buy at a recreational store.
 

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Discussion Starter #220 (Edited)
Share price still falling, a new all time low. And the yield is now 10% or something? Today HMMJ went ex dividend with its massive, bizarre securities lending dividend (I don't think Canada has ever seen anything like this before)

According to stockcharts, previous historic low was $8.21 in June 2017. So now HMMJ is at a historic new all time low.

Price: $8.18
Yield: roughly 11% [as long as short sellers still want to borrow shares]
Outstanding Shares: 49,749,210

Interestingly, that's net new inflows... new units... since a month ago and even since a few weeks ago. People are buying the falling knife.
 
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