Cabot’s “Apple of Cannabis”

What's Timothy Lutts of Cabot calling "the strongest stock in the entire cannabis universe" in ads for Cabot Marijuana Investor?

By Travis Johnson, Stock Gumshoe, March 19, 2020

Where might we find opportunities these days? Perhaps in the beaten-down marijuana sector? It’s awfully hard to say, since every sector is really “beaten down” this month, but let’s look at the latest pitch from Cabot Marijuana Investor ($497/yr), since they’ve been touting a hot idea that editor Timothy Lutts is calling the “Apple of Cannabis.”

The big picture spiel is about finding companies who do things differently — like Apple did with the iPhone in getting rid of the buttons and the restrictive hardware, caring less about battery life and tradition and more about future functionality and ease of use… opening the world up to the potential flexibility of touchscreen controls and a heretofore unimaginable range of applications and uses for what we somehow still call “phones.” Here’s a taste of that reasoning from the ad:

“To identify these leaders we need to look for those that do the most important things differently.

“To do that, we should first understand what the industry norm is, so that we can tell what ‘different’ even looks like.

“What are the “long battery life” and “mechanical keyboards” of the marijuana industry today?”

And as that applies to the marijuana business…

“There are two things that are happening in the marijuana industry today that are considered to be the right way of doing business…

“Number one — nearly every sizable player wants to be everything and everywhere at the same time…

“And number two — which is really a consequence of number one — to fund their unrealistic growth plans, nearly all marijuana companies are issuing stocks as if they are Monopoly money….

“Most of the time when a marijuana company raises capital, it has to do it via a highly dilutive stock offering…which, to put simply, shrinks the wealth of existing shareholders.

“The SAFE Banking Act will certainly alleviate a lot of this issue once signed into law…
(Since it will give marijuana companies more options when it comes to getting growth capital)

“Until then — careful capital management is the cornerstone of shareholders’ wealth in this market…

“And the companies that do it well will reward their shareholders handsomely….

“The ‘long-battery life’ and ‘mechanical keyboard’ of the marijuana industry is being unprofitable and diluting your shareholders.”

I guess that makes some logical sense — it’s hard to say that being fiscally responsible is going to be an enduring advantage for a participant in a commodity business, but it’s certainly not a bad thing to be profitable and shareholder-friendly. Especially these days, when raising money via share sales is going to be a lot more dilutive for almost everybody than it was even a month ago.

And, of course, we then get to the point… more from the ad:

“There is one stock that fits the bill…

“In fact — after further analysis I’m confident in saying that today it’s the strongest stock in the entire cannabis universe!

“Not only does this company do things differently from the crowd, but it also checks off all the requirements of the All-Weather strategy…

“There’s tremendous revenue growth, healthy earnings, proven management, valuation, growing institutional support…”

All of those are good things, no complaints. But how about some actual clues? He does oblige, to some degree…

“The stock is currently trading above its 25- and 50-day moving averages, and the chart has a clear pattern of higher lows and higher highs since its most recent bottom….

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