Paul Mampilly’s huge marketing machine at Banyan Hill tends to drive a lot of questions our way, and this latest one about a medical marijuana stock caught my eye… but I should warn you up front that it’s a teaser ad that’s very light on clues… today we’re going to have to do some guessing.
So what’s the story? Well, Mampilly’s promoting his $10 Million Portfolio ($4,995 one time fee, no refunds, plus $499/year for ongoing access), which is the hole of the marketing funnel and, if Banyan Hill is like other publishers, by far the most profitable one.
This service is promoted as using Mampilly’s “GAP Strategy”, which he describes using an acronym:
“G stands for ground floor.
“A stands for accelerated profits.
“And P stands for peak pessimism.”
From the examples he gives, most of which were either highly levered investments made during the financial crisis (like Paulson’s bet against mortgages, or Berkshire’s “rescue” investment in Bank of America) or picks of companies that were on the verge of bankruptcy, it seems to basically mean, “buy hated stuff.”
Which is certainly a time-tested strategy, if you can buy what other people don’t want to buy you’ve improved your odds of “winning.” You haven’t made the odds of success 100%, not even close (there’s usually a really good reason why no one else wants to buy those stocks, of course), but you’ve increased the chances that you’re buying at a good price.
So what is it that we’re being teased with today? Last time out, Mampilly was teasing Fannie Mae (FNMA), which certainly fits the “beaten down” stock that no one else loves, and it so happened that he had great timing — his pitch came out just after the market bottomed, and just as the chatter about another attempt at re-capitalizing or reforming the federal home loan guarantors heated up again, so the stock just about doubled in the past month.
This time… well, I’m not going to be as definitive as I was in answering that teaser question on January 4, but I’ll check out the few clues and give you a guess or two.
Here’s how the stock is hinted at in Mampilly’s ad:
“I am moments away from releasing a brand-new trade recommendation for my elite The $10 Million Portfolio readers….
“… this stock sits at ground zero in one of the most explosive markets I’ve seen in decades — medical marijuana….”
And he gets more specific about the timing of his upcoming recommendation in some versions of the ad:
“This Wednesday, I will be issuing a critical trade recommendation for members of The $10 Million Portfolio research service.
“In fact, it may be one of the most important picks I’ve made … at any time.”
(In case you’re wondering, I first started receiving this ad on Friday afternoon, February 8… so presumably that means he’ll be releasing this lightly-teased idea to his subscribers in a couple days, on Wednesday, February 13.)
Anything specific that the Thinkolator can chew on? We do get this:
“You see, this ‘off-the-radar’ pot stock company expects its revenues to soar from $15 million in 2018 to $601 million in 2020.”
That’s a huge number, by the way. Even giant Canopy Growth (CGC), long the highest-profile of the Canadian marijuana companies, is only expected to have about $600 million in revenue in 2020 ($618 million is the average estimate by analysts).
(No, he’s not teasing Canopy Growth — CGC had more than $70 million in revenue in 2018).
So… which stock could this be?
There are a number of possibilities…
Curaleaf Holdings (CURA.CX, CURLF) — this US cultivation and dispensary rollup had about $16 million in revenue in the third quarter last year, and no revenue in the prior quarters, so you could stretch that to be a match… and there are two analysts giving 2020 revenue guesses for this one, averaging out to $595 million. Not particularly at a “pessimistic” price at the moment, it did dip a bit after they went public at the end of October at a crazy valuation but it is now back to very close to that C$11 initial share price. Curaleaf focuses on “medical and wellness” and the investment case is similar to a few others like MedMen who are trying to build out big multi-state networks to take advantage of advancing (but not too fast) US legalization (as long as marijuana remains a schedule 1 drug in the US, interstate transport remains illegal — and a lot of states require that cultivation, processing and retail all be handled within the state).
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Harvest Health & Recreation (HARV.CX, HTHHF) didn’t have any revenue to speak of in the first three quarters of last year, but is forecast (by one or two analysts, at least) to have $15.8 million in the fourth quarter… with an average forecast of $548 million for 2020 revenue. This one is nowhere near “peak pessimism,” though, it started trading a few months ago and is at all-time highs right now.
WeedMD (WMD.V, WDDMF), which is seeking to differentiate itself in part with medical products, including CBD and THC oils for the senior care segment, and which says it has a catalogue of seeds and plants that are being used by other producers. I don’t see any real forecast of $600 million in 2020 revenue by the company or anyone else, and the stock is not particularly beaten down at the moment, but it is a current revenue match, to some extent, with C$14.5 million in revenue over the past four quarters.
And The Green Organic Dutchman (TGOD.TO, TGODF) is a pretty good match on the numbers as well, they have just started posting revenue and are forecast to have $14.7 million in revenue for 2018 and $600 million in 2020… and while they are not entirely medical (they are positioning themselves as an organic grower, for the most part, with facilities in Quebec and Ontario), they are pushing the angle that medical marijuana customers value organic products (and, of course, that organic marijuana trades at a premium to the regular stuff). And they are somewhat beaten down, the stock has been weak for several months and trades at less than half of the October highs.
So those are certainly possibilities, and you’ll have to make your guess as to which one might fit Mampilly’s criteria best… but for my part, my guess is that he’s teasing a truly beaten down stock, Namaste Technologies (N.V, NXTTF).
Don’t buy this stock because I’m guessing that, by the way. I don’t particularly like to write about teasers when I don’t have at least 99% certainty that I’m right, so I want to be clear that this is not an answer… it’s a guess. The Green Organic Dutchman or Curaleaf might easily be better matches (or better stocks, though I’m not buying any of the stocks I’m mentioning here), this is mostly just a hunch.
Why? Because there is real company-specific pessimism washing over this stock, and because Namaste pitches itself very specifically as trying to dominate one specific part of medical marijuana: matching the right patients with the right strains, using their telemedicine app and their database of available products (and delivery methods).
It might all be hooey, of course, the company has been dreadfully managed and recently fired its CEO because of the crazy promises he made at completely inappropriate company events, but that’s the claim they’re making.
Namaste really started out, and mostly still exists, as an online vendor of vape pens and associated products. They have been pitched a few times as the “Amazon of Weed” (a comparison they covet, of course), and they have basically started or acquired websites that sell vaping products in a bunch of different countries.
Their acquisition of Cannmart, which has now received the first “sales only” license from Health Canada, gives them the license to sell cannabis from different Canadian and international suppliers (and to grow it, though they say growing is not their intent), and the hope is that they’ll be able to sell a large variety of different strains from around the world and use use their artificial intelligence platform to best match consumers/patients to strains…. also leveraging the large customer base from their existing vape-product ecommerce operation, and integrating their NamasteMD “patient consultation” portal that can p