I know the feeling… sitting there while a stock (or crypto-currency) you’ve been watching for weeks begins to accelerate upward… faster and faster and faster. You want to be responsible, so you think maybe putting in a limit order on a “dip” will do the trick. But the order goes unfilled. Then the devil on your shoulder starts whispering “just buy it, you’ll be driving a lambo in no time.”
Word of advice, just walk away from Tilray (TLRY) — quickly. Delete it off your watch list, erase it from your memory and focus on other stocks you like. And do not cheat by heading over to CGC or CRON, thinking a stock in the same exact bubbly industry ought to be a responsible form of trading. Your just buying the same risk for half the profit potential!
I get the appeal of Tilray, and once upon a time — as in 3 weeks ago — it was a decent speculation play for young investors. But now it is just Icarus-flying-to-close to the sun. Ask yourself this, do you understand the risks involved with buying a stock so volatile that trading was halted 5 times today on the NASDAQ? Of course you don’t, know one does… that is why we are in this situation. Let me explain.
For one, we are seeing the ultimate bull-versus-bear battle. This bull market has been ongoing since 2009, and it took a decade for this type of speculation to finally pop up in the stock market. TLRY is the ultimate example of how smart money isnt always *ahem* smart. Some big traders are holding epic short positions on pot stocks right now. But market breadth has been notoriously weak recently, leaving many stocks occupied robots and retail accounts. Its normally a simple short, since retailers move like a school of fish when the sharks come to play. Usually… yet every so often, retailers can crowd a stock so drastically that even the biggest of traders ends up like James Franco in that movie about the boulder.
Case in point, pot stocks. We have seen an unprecedented inflow of retails buyers (i.e. you and I) putting in market orders all the way up. So you now have a bunch of hedge funds with millions of dollars on the line trying everything in their power to destroy a bunch of millennial’s lifetime savings in order to report a quarterly profit. It’s a f**king mess, don’t turn your brokerage account over to the net profit margins of Axe Capital. Please. If you are already in the name, then pray-to-god you didn’t buy at the top since the PE ratio is indicating till be about infinity-amount-of-years until Tilray grows into their valuation. Take profits, if you have ’em.
And if that is not enough risk for you folks, then let’s run through the others:
(1) Marijuana is still illegal in the U.S. We have a conservative regime unlikely to change that any time soon. And, oh ya, they are fighting a war against opioids… so unlikely they do an about-face on drugs. Supreme Court aint ruling on it anytime soon either… there are only 8 sitting Justices.
(2) Currency risk is not something people think about but absolutely matters here. The U.S. dollar is strong but Tilray is not a U.S. company. Instead, these wild-lings decided to build their castle beyond-the-wall. And guess what, the Lanisters (aka Donald Trump) are currently slapping tariffs around like they are parking tickets. Any potential trade deal-or-no-deal is gonna move exchange rates around like a game of musical chairs. Any foreign company doing business in foreign economies will see their profits affected by the changing currency AND the economic deceleration we are seeing in other countries (just take a gander at Turkey)
(3) On a purely technical basis, well, there is no basis. This thing is more parabolic than a skateboard ramp. When it falls you have no cushy support level for seasoned investors to hold their ground. Instead, the bears will hold the high ground (pun intended) while you guys storm a beach like its D-Day. There will be carnage.
(4) Low Float = Volatility
(5) Tilray’s one earnings report didnt even show a positive EPS number
(6) With a value like this, the CEO would be a dang fool not to announce a secondary offering that would dilute your shares
(7) They aren’t even the best-in-breed in their own semi-legal industry; that mantle belongs to CGC
(8) If the U.S. market ever opened up to them, you have a horde of burgeoning companies in Colorado, California, Oregon, etc. chomping at the bit for a piece of market share
(9) We have no clue what the true demand is for cannabis, medical or recreational. Large pharmaceutical companies are unlikely to go down without a fight; they have monopolies on their current pain products. For the economically illiterate folks out there, just know monopolies are better than a free market model when it comes to profits.
So when is a good time to buy Tilray? Call me crazy, but I personally wouldn’t touch it until it reaches its IPO price range in the $23 area. That is really the only technical level of any significance. But if your a logically aggressive trader, then perhaps look for something around $35, which was the spot where this rocket ship launched from Cape Canaveral.
In the words of Nancy Reagan — a former first lady whose mission was to end illegal drug abuse — ‘JUST SAY NO!’