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Don't worry, today's growth in HMMJ was honourably taken by Aphria as soaked that up with the $17.5M of convertible bonds that just went into common shares for people to buy. They also issued $40M in more in convertible bonds, which have a conversion price of $3.29 which the stock was unbelievably trading above for almost 15 minutes this morning, before it tanked by over a whopping 23% in minutes. All this from a company which has issued $132M of equity in the last 9 months, and had $1M of EBITDA in the last quarter and a market capitalization in excess of $1B and trades on the most reputable stock market in the country. Aphria's last offering was at $5.00, so I wonder how they feel about the convertible bond being callable at $4.94. To be fair, I'm not certain whether other companies raised capital today, but it seems to happen pretty often. Any warning signs here? I feel like a broken record, so I may stop complaining soon and retreat to my boring pipelines, utilities, telecoms and banks.
 

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Discussion Starter · #23 ·
Please don't misunderstand my excitement. These are crazy, unjustifiable valuations and insanity across the board. But if you spark that bubble psychology, the thing can really run away... I'm just saying there may be money to be made speculating on the bubble. I wouldn't invest more than 0.5% my portfolio in the sector.
 

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I get that, but hope of insanity is not a great investment strategy. You don't want to be the one left holding the bag. If anyone does get in, I would recommend setting a price at which you would get out.

http://www.theglobeandmail.com/news...al-process-for-pot-producers/article34665698/

I heard somewhere there are something like 200 applications to enter the space. And Health Canada is going to accelerate the process. Barriers to entry are being removed. It is fascinating, of course, can't wait to see how it all turns out.
 

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Discussion Starter · #25 ·
I would approach this acknowledging the possibility of a 90% loss.

The approach I am using is watching the fund NAV and looking at the fund flows. If it establishes a pattern that makes me think that money is steadily flowing in, then I will join with the idea of riding the bubble psychology. If on the other hand there is the initial interest but than NAV stops growing (showing that interest has exhausted) I may not touch it.
 

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...just don't INHALE the thing...!!
Fer sure!
I just hope that when the smoke is legalised, the same goes for oil.

Lots of oil is available in U.S. but they won't ship to Canada;
which is probably a good thing, as a horseman is likely to show up at the door if any oil is delivered.



h/t @peterjonathanna and @BreedersLove
 

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Canopy just launched a website called "Tweed Main Street" where you can buy medical marijuana online (with a prescription). Presumably once it goes legal for recreation this same website will sell the recreational stuff too. Anyways, the only products I could see on there were oils, so I believe they are already available here, for medical use. This seems to imply they would also be available for recreational. If I were the government I would want to encourage that, as smoking can be hazardous to one's health.
 

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Discussion Starter · #31 ·
I spend lots of time in Oregon & Washington states, where weed is "legal". But the fact it's still a federal crime makes a big difference. People are hesitant to buy marijuana at shops because they have to show their IDs and will be recorded. For example I would never buy weed even in these legal jurisdictions, because I could still get in federal trouble.

Truly legal marijuana in Canada is going to be much different than state-by-state legality in the US
 

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...and everyone called me an idiot for solely focusing on this sector last summer/fall (Humblepie). Portfolio is up about 300% since last August thanks to these stocks.

Some thoughts from someone who has watched this sector day in and day out since last summer...

The easy money has been made. Now that legislation has been tabled, there are no major known catalysts in sight. We witnessed the usual buy the rumour, sell the news event regarding legislation. Will prices be much higher a year from now? Absolutely (assuming no major broad market pullback). However, with no major catalysts in the near term, for the first time since last summer I fully believe the stock prices will slowly bleed down over the summer.

Personally, I will be waiting for prices to settle down to more reasonable levels, and re-enter with longer term positions in a few months (probably at the end of summer). It's obvious to me that with the type of hype we've seen in this sector to date, that when legislation is actually passed and rec becomes legal sometime next year... we will see more hype than ever. So if you bought today and plan to hold for the next couple of years, I think it's a pretty safe bet prices will be much higher... however I think we will see better buying opportunities late summer/early fall.

A lot of people think that now is a better buying opportunity than ever, since legislation being introduced has somewhat derisked the industry... I'll take the opposite bet that a lot of people now have nothing to look forward to over the summer, and will seek better entry points.

James, I think we will see substantial upside over the next 15 months, with most of the movement occurring late this year (in case legislation gets passed earlier than expected, they allow mail order rec until provinces are correctly setup, etc.), and definitely next year when these companies really start bringing in the revenues.

Good luck to everyone who decides to play :)
 

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Well good work. I'd have gone through a lot of underwear over that period.

To be fair, no one actually called you an idiot, least of all Humble. Craxy like a fox is what I recall, along with some salient questions and an invitation to update us - as you just have.

I'll continue to hold a very small, token (or is it tokin') position in WEED which remains well in the green from acb. It's my only high flyer (so to speak).
 

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I can see the Bowmanville processing plant from my house. They use to have every light on all night, now just a few likely big budget cuts.

I made my 95% and bought 200 TD couple weeks ago when it was on sale. Thanks SL.
 

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One thing I've noticed is that the analysts are using a price of marihuana of $9/gram in their 'projections' when they do research on this sector.

This is completely unrealistic as the illicit dealers, with their overhead including the risk premium associated with the criminality of their crop, only charge $9/gram.

$3-$5/gram as a retail price is more realistic, with government taking their cut, for a wholesale pre-tax price of $2-$3/gram.

A lot of these stocks are going to have their wings clipped big-time once actual pricing rears its ugly head. Kind of dumb that the Bay St. analysts are projecting prices similar to that of illicitly produced marihuana, for the 'legal' stuff.
 

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HMMJ is now closed below where it closed on its first day of trading. Aphria dumped $75M of shares last week. That's nearly 60% of the entire NAV of HMMJ in one day by one company - it certainly can't soak up the supply of stock.

I'm guessing the retail price will be north of $5 but not by much, demand for legal pot at black market prices will be very strong as a vast majority of people would rather pay the same to buy it legally. $7-8 is likely, especially after taxes/fees. But that could quickly be pushed down by massive oversupply, which is one of the "big 3" risks of supply (massive overproduction/dumping/competition), regulation(taxes) and barriers to entry (nil).
 

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Discussion Starter · #40 · (Edited)
HMMJ is now closed below where it closed on its first day of trading.
That's not what I see in the chart data. First day closed at 10.25 ish, today closed at 10.44
http://stockcharts.com/h-sc/ui?s=HMMJ.TO&p=D&yr=0&mn=0&dy=15&id=p43473877529

Aphria dumped $75M of shares last week. That's nearly 60% of the entire NAV of HMMJ in one day by one company - it certainly can't soak up the supply of stock.
Yup, that's a lot of share issuance. Hard to tell at this point if there's enough investor demand to make this work. Managing a bubble is a delicate business... the MJ companies would be wise to not get too greedy with equity issuance, because they should want equity prices to keep rising (this trend is what fuels the bubble).

If the companies get too greedy and try to issue too many shares, they will suppress price moves in the sector and there will be no bubble momentum.

I still have no position in HMMJ and continue to watch it, assessing whether I think there's enough upward pressure/inflows for a good run-away bubble.
 
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