By Nigam Arora
• The inference is that the same factors are applicable to other popular marijuana stocks such as Canopy Growth Corp. /zigman2/quotes/200603886/composite CGC -0.75% , Cronos Group /zigman2/quotes/206842762/composite CRON -1.92% , Aphria /zigman2/quotes/207425803/composite APHA -3.44% and Aurora Cannabis /zigman2/quotes/210559470/composite ACB +5.01% .
• Recently, in a surprise announcement, MedMen Enterprises /zigman2/quotes/201940908/delayed MMNFF -5.77% abandoned its buyout of PharmaCann, whose price was originally set at $600 million. It was the biggest marijuana deal in the U.S. at that time. MedMen’s CFO was ousted. Those developments created a negative environment prior to Hexo’s announcement.
• The vaping-illness crisis is adding to negative sentiment, especially for a stock like Greenlane Holdings /zigman2/quotes/211319667/composite GNLN -5.79% . For full disclosure, an Arora Report service has a highly profitable short position in Greenlane.
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It is worth repeating Tilray stock’s 75% decline. Many, if not most, marijuana investors have losses in their portfolios. The year-end is approaching. At The Arora Report, we expect significant tax-loss selling in marijuana stocks between now and Dec. 31 unless there is good news that buoys the industry.
What to do now
The plan is to opportunistically pick the points when the selling is the greatest and buy select marijuana stocks. It is important that investors bring sophistication to their marijuana investing by implementing concepts such as long-term core positions and short-term trade-around positions. We also plan to selectively short-sell if there are “up” spikes.
Marijuana investors ought to learn the skill advocated by Arora’s 14th Law of Investing and Trading: “To be successful at investing and trading, become a master of position sizing.”
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. <INTERNAL-PAGE URL="/author/nigam-arora">Nigam Arora</INTERNAL-PAGE> is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.