by Travis Johnson, Stock Gumshoe | December 17, 2019 3:44 pm
Jimmy Mengel[1] is out with a new marijuana[2] stock ad for us, teasing the “next king” of the sector as he looks for more winners… and, of course, he’d like you to subscribe to his newsletter to learn what this next winner might be (actually, he’s pitching this as “you buy my $99 report, nonrefundable, and I’ll give you a free one-year subscription to The Crow’s Nest, after which that will autorenew at $129/year, but whatever).
Gumshoe readers, naturally, want to know what the story is before they plunk down a hundred bucks with no chance at a refund if they don’t like the newsletter… so let’s get you started, ID the stock for you, then you can think for yourself.
The basic spiel is that this will be the next huge winner pick from Jimmy Mengel, who recommended Canopy Growth (CGC, WEED.TO) very early, when it was down around $1 or so — I can verify that he did tease that stock early on, starting in 2015 I believe[3], so those who followed that suggestion from him were probably quite happy. Here’s a little taste from the ad:
“Canopy isn’t going to be the cannabis company to take us to the next round of growth.
“It’s jettisoned its founder, diluted shares, and like any large company, won’t be growing at a large enough scale to make a difference for investors.
“In short, Canopy isn’t going to be delivering another big win anytime soon — which is why I’ve taken my profits and continued my search for an up-and-coming company that can.”
And then he sums up the other clues he drops quite nicely on his order form here:
“There are three big reasons why this stock will soar in the next few weeks:
“1. Its expansion is almost complete… and the announcement of its progress will be the biggest event in this company’s history. A million square feet will cement its spot as a major cannabis grower
“2. It’s just been added to the NYSE… no other cannabis company in the world has been in this unique position of such rapid expansion AND a recent U.S. listing. Not even Canopy Growth had this advantage!
“3. And its partnership with a major $13 billion beverage company dovetails perfectly with its expansion… Once it announces the details, every investor in America will want a piece of this cannabis company”
So there you have it… what might the stock be? This is, sez the Thinkolator, our old friend Hexo (HEXO)… which just reported its latest quarterly earnings yesterday, so the news is good and fresh.
Things have not gone terribly well for Hexo lately, though that’s true of most of the marijuana stocks in the past six months — one writer from TipRanks blames it on Quebec[4], though it’s also true that most growers and producers up North are having trouble with expenses being higher than they expected, and retail prices being lower, and with the slow rollout of beverages and edibles in Canada[5]… and though they do have a 1.3 million square foot super-greenhouse center in Quebec and some other very large facilities in Ontario, it looks like they’re also not going full-out, presumably because of lack of demand (cultivation is “on hold” in parts of those facilities).
There’s a good sum-up of the situation from the CEO in the conference call transcript here [6]that’s definitely worth a read, and you can read the rosy sales pitch in their investor presentation here[7] (that’s from last quarter, but still fairly up to date). Like many marijuana companies, they recognize the problem with being a commodity producer, and they’re trying to move up the value chain by focusing on specific strands and on comomdity-derived products — particularly cannabis-infused beverages in their case, with their Truss partnership with Molson, but also a bunch of other products from vapes to edibles.
They have distribution throughout Canada with at least some of their brands, and they consider themselves to be the “premium branded partner” for the big consumer packaged goods companies, though it’s so early in this product development cycle (and I have so little personal knowledge of that marketplace) that I’m just parroting their words here — I don’t know if they’re really going to lead, or if some competing products could swamp them.
And, of course, they don’t have any profits to go with their solid revenue growth. And they probably won’t for at least a couple years, particularly if they’re investing in product innovation and distribution. They do say they’re tageting positive cash flow next year, or at least they were saying that in October… don’t know if they’ll make it or not.
So this is far from being the worst cannabis company, and I do like the focus on beverages and edibles… though it’s important to note that we still don’t even really have a clear idea of how big those markets might be in Canada, let alone elsewhere. All the estimates could be wildly rosy, just like the estimates about demand for legal cannabis have been pretty over-the-top in most legalized states and in Canada so far (partly that’s because black-market cannabis is now more socially acceptable and is a lot cheaper, to be fair). The future does seem to lie with the brand builders, and there are some brands here… I just don’t know if they’re going to succeed or not, so you’ll have to make your own judgement on that.
But yes, this is Mengel’s latest tease… and if you’d like some backup, I should also note that a few readers have already posted this answer (thankfully everybody gets to be right!), here are a couple of the comments we received on this earlier…
Reader tinskov submitted[8]:
It is HEXO, I watched Jimmy’s presentation and we can see Sébastien St-Louis, CEO of Hexo, many times during the video pitch. Plus HEXO’s master grower is indeed a female, they’re building a 1 million sq feet greenhouse, the beverage partner – a 13Billion company – suits Molson-Coors, which is Hexo’s beverage partner and has a market cap between 11 and 13 Billion, depending on the days. Plus the images of the facility in Mengel’s video fit the images in promotional videos by Hexo. Plus Hexo is located in Gatineau, Quebec, at about a one hour drive from Ottawa, as stated in Mengel’s video. Some images in the pitch video show staff of the company with a Hydropothecary logo on their clothes, Hydropothecary is the medical brand of Hexo. By the way, I am from the province of Quebec, so I can recognize the location of the images in Mengel’s video as being shot in Quebec.
And last week, a jamesseamus posted this[9]:
Looks like hexo.. lisred on NYSE. Got a beverage coming out in Cnada with Molson. Not able to verify that they have a lock on Purple Kush or are going to triple their greenhouse space…. but seems to fill the bill… and Jimmy separately fromhis new report issued a buy on HEXO recently….
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So with that, dear friends, I’ll pass it over to you — what do you think of Hexo? Like their CPG focus and brand building ideas, or are you worried that, like everyone else in Canada, they’ve been producing a lot more marijuana than they can sell at a good price? I can’t see the future and I don’t know the Canadian pot marketplace, but I’d be delighted to hear what you think… just use the friendly little comment box below. Thanks!
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In Ontario they gave up on the cannabis store lottery and have announced they will allow a lot more sellers. They should provide the channels to move more cannabis.
weeds money has been made and it aint by regular small investors we get to pick up scraps that will sink soon , !!j
Not really Andrea.
There is ONE weed stock doing just fine and will move higher from here.
It’s their business model that I like.
IIPR.
Is IIPR really a weed stock. No, they rent to people who are in the business correct?
GOOD LUCK JETJOCK !WHAT IS YOUR ENTRY PRICE? Under water now? You may never get to come up for air……
I know a guy who bought MJ stocks as penny stocks….made a lot of dough…sold out….now it’s slow moving but in the future will be really big….especially for pain relief and overall health…! People are getting sick and tired of the drugs that are addictive.
that is so true Andrea. I lost 10,000 already because one I did not know what I was doing/self-taught. Did my due diligence by checking out the companies and some I simply went by what others were saying. I certainly hope that the Cannabis Industry comes back up as I do not feel it is going to be anything soon as unfortunately I did learn that even the stock market is somewhat rigged by big investors.
HAHA…you MUST be joking!
Take your comment and insert my name in the beginning. Did same thing, I’m down by $4,000. Here’s my lesson: don’t try to make a quick buck if you’re somewhat of a newbie. There are big players out there who know when to move on something. Here’s another gem, I used to have a few shares of SHOP that I bought at approx $80. Yup, I sold them.
I got rid of a bunch of losers, they made everything sound good but I will not sell any of my CBD stocks because I think that will come back …there are so many nonadictive reasons to feel positive.
I completly disagree with the regular folk picked anyone’s scraps at all personally know of more than a dozen small groups that did better than we hoped at 1/100 of what the 4 of us back in 2015 2 Canadians and 2 Americans met at a rangers game and by the end of 2016 we had a group of the low 50 and 6 months prior to aone of the votes during Canada s legalization. We all changed our live and kids and hopefully kids kid and although the game has changed with the voting schedule we as other groups we have met along the stressful years at cannabis cups as well as investors presentations. Not one of the good 1000 folks spread out throughout the USA and Canada know the regular billionaire investors wouldn’t touch it nor believed in it as well as every one of the investment companies that after the 2018 early vote started selling there teases. And their famous boots on the ground that taught us all how full of crap everyone to have claimed to travel the cannabis circuit years prior . The game changed again and the first entry of the usual cant loose investors / corporations, public and not were the sole cause and first and last of that magnitude with the Tilray , to us the scam but showed us just how they do operate. Let’s call him say billy gates for penny a share along with a few others are what made tilray do what it did and to the day still is garbage and after bill gates cleaning lady’s mailman got around to hearing were the last groups that were invested pre ipo and common sence or common kept secret the same regulars that portfolios have forever been funded with the hard working civil service that throw there money into there tease master bank accounts the first newly hired angel investment teaser was hired to cover the cannabis field that up until the rude stuck up as if they were in titled to what we were lucky enought to accomplish and put guys and gal blue collar folks in a room with the likes of the boots on the ground people it was like a regular joe standing up having a rank on mother’s bit at a comedy club with the headliner for the evening . Mostly out of anger seeing first hand how and why the scraps you mentioned have been and always will be to people like us as with jimmy who like we learned all others no exceptions after selling thound of yearly subscriptions started accepting the money from back then companies like mass roots started by a trust fund opioid addict which is not ment as a insult but a fact and a company that had never made a penny from cannabis sails plant or not related. Not to single jimmy Mengel out but when he struggled to ptounounce aphria’s name we watched what was still buy pre vote set up by the pm of Canada voted in for the sole purpose of then only to achieve g3 status for his country . Again saw up close a leader of a country and heads of every providence what would reflect the rico statute fulling invested and aware of the bank of Montreal the first of many to break federal law being the largest at the time bank involved funding canopy only a small newspaper back page cane clean but with not mention of the legality wrong doings what we saw as a lawyer ordered cleansing of any guilt . Tilray on a maximum time on the market chart shows the line still heading straight down just within the week finally becoming lower priced than canopy. . . The tilray we call scam the important folk see as how things are suppose to work made there killing which although we had what the smaller of the big boy insider investors and all of our combined money in play approaching the 2 Nd to last vote each couldn’t compete never being as untitled to as the important people that at 5-40 cents a share gigts took temporary control of what started the dumb of the dumber just buy ipod when they hit the market and turn their GRUB STEAk into a fortune. Michael Robinson a true hippie in his own right to our suprise was just as bad as the rest but jimmy m who we had access to that pay for info portfolio that every so often some how a stock at a time where needed during second year of the marijuana club buy in prices backdated to appear as winners when besides the big 3 and Kush were all losers out of the 15 stocks shamefully and probably due to the money accepted to reccomend to his paid customers didn’t right that off as a looser even after they , they being mass roots were eveited from their Denver office space originally sold as the facebook of pot if you could gain access to the web sight that never became operational almost like a 3 year old created it barely a chat room the short time there server was up . Still money to be made just not like before when they all when hyper high with no real involvement with any cannabis product or product at all always sold the first day the mutuial grren elevator stopped all 3 digit gains with 15 Pct 4 digit gains all real none profited by jimmy or Michael by ways of investing at least just like the president of the companies caught onto and the year end 2018 vote ended when all companies share holders sold on feb1 and feb 2 not crooks like boots on the ground but had to and re invest the earning from sale of stocks which we respected especially overhearing cfo’s over lunch passing the date along to each other. So a lot may be burried in a stock or few best advice wait for a USA hype announcement along the way to federal USA passing if they would leave trump alone and. You will survive as long as the company does before that taking place. Unfortunately just like early Las Vegas the skim is being done everywhere with no real rules and refs unforced especially the task of counting and accounting for each plant harvested even a company like evio struggles to be aloud to force licences operations to have there cannabis tested so along way from true earnings with the black and grey market still around bigger than ever. Anyone who sold on there corner back in the 1980s knows 1 million profit is easily done in the proper neighborhood so the skim has to go and the govt stepping in and Canada actually being recreational legal not just flower and not bogged down to online sales when the govt owned retail made a mess of the prices and sales to even the people wanting to buy and pay top dollar legally the differnt rules threwout the country and export still not figured out legally on paper but hang in just D.D more then ever take the 25 -50 Pct every chance you get there is a lot of up and down still to come. Best to all sorry for spelling and punctuation as always
Timing is critical…as is a solid understnading of the economic basis and reality of the proposed investment. The Pot Millionaires club is now closed, guys…and gals.
It would be hard to find a sub-sector which has met with as much bloodshed as the Pot Stocks. Utterly destroyed over the year. The large cap players (I call them the Big5) have lost a fortune for investors this year. (They have lost about $35B and are now only worth about $17B). HEXO, while not a Big5 Pot Stock, lost about 75% of its value. Central to the problem are a few things.
First, pathetic performance from Executive teams who seem mortally detached from accountability to their investors or capable of understanding operational necessity. Second, a Canadian government regulator who has confused their role with the role of say, the FDA. For example, this regulator allowed the virtual ruin of a Canadian company that was growing cannibals in a room they didn’t know was being used. I’m trying to be kind here, but Health Canada doesn’t understand that the real competitors of their nascent industry are the drug cartels. These are also the competitors who appear to have introduced the vapes that have killed a number of people. As in Europe, these government regulators are primarily focused on slapping a tax stamp on a couple grams of weed. Third, as all these forces converge, the street prices are being dropped and undercutting demand for retail mj just as hundreds of thousand s of kilos of weed are trying to be sold in their retail stores. The vape controversy has the new categories of use being shut down or delayed causing billions of lost opportunity.
It’s a classic pincer move in play here. The drug cartels were never going to let these novices (this includes the companies, investors, and the tax collector regulators) walk in and end their trillion $ trade without a very dirty fight. As investors hemorrhage cash flow, shorts step in smelling blood in the water. The cartels have no such enemies and law enforcement is nowhere to be seen on a scale to deal with this black market.
My clients have asked me about the sub-sector and Ihave advises them to stay very small (no more than 3-4% of their investment capital) and be ready to lose it all. If I were going to bite here, it would only be on the best name or two. The ETF’s will take you down along with the Big5. That being said, I would also say that when the sub-sector gets around $10B in total market cap, it should be a relatively low risk entry. Until then, I think you have to expect some tough sledding. There are dozens of dozens of companies here that will never see a dime in profits.
I hope this is of some use. As always, I appreciate the work done by Gumshoe.
Regards,
Buck
I have 4 MJ stocks….bought in too soon….down considerable and am still holding on as it’s a matter of time for laws to pass in the US for them to prosper. I have ACB as one….probably now 1/3 of original cost. I think the CBD and for sure the beverage drink business will be super big. Just think of the energy drink market currently. I think the chocolate and gummie bear market will be good for the non smokers….! Still holding 4…sold 1 doggy one and bought a security system company instead who is doing fine. I think Hexo will do fine also but don’t own it….4 MJ stocks is plenty.
Big profits can only be maintained by volume business! Easy profits are over!
If only you could buy stock in drug cartels….
Anyone who’s watched their HEXO investment burn this year may want to check in with the Schall Law Firm, who just today announced the filing of a class action lawsuit against HEXO for possibly being a bit untruthful regarding their financial performance, among other crimes and misdemeanors. Great timing, Gumshoe!
Thanks for the comment. I bought HEXO warrants. I was swindled. But Schall does not mention the warrants in their signup form for the class action> I have contacted them directly and asked that they expand the class to include warrant holders. Your comment much appreciated. Down 96+%…..lol
Bonne chance as they say in Quebec
Yes, the MJ promoters are only trying to get us naive, fantasy, and wealth-obsessed folks crazed enough to buy their latest pitch. I already got burned by a more reputable, well-established Promoter. And it was NOT a penny stock. But I never have too much cash to toss, so when the direction firm, I cut away. When I talk to old lovers (sure) heavy into pot way back then, they are trying not to pick up old habits! I, indeed, wish people would smoke the stuff because we likely could have a compassionate world, but let’s face it: people are addicted to other things – sports, movies, video games, anything except feelings.
I will keep an eye on the industry, but I doubt much will happen sooner than five years, maybe longer. I believe pot is stronger medicine than most are prepared to deal with – and what’s with the Milineals, anyway? Generation Z? We can only hope. And don’t forget that the majority of the sick and sadly, dying, are addicted to their docs. Bless them all.
Leave it to the Hosers to craft a STRANGE BREW with alcohol & maryjane!! They already re-voted in the boy wonder —-what’ll be next??
HEXO (NYSE:HEXO): Q1 GAAP EPS of -C$0.24 misses by C$0.14.
Revenue of C$14.5M (+154.4% Y/Y) misses by C$1.2M.
when cgc was 6 and got bought by constellation was easy money, not now
I keep getting spam emails about how THC and CBD can be formulated in labs, cutting out the grow process and offer consistent quality. If so, I think there will be a total change in the weed industry and the pharmaceutical companies will be the big winners here.
IIPR’s chart looks like a 45 degree downward slope….. I managed to ride it up from $60 to $140 and (blessedly) exited. Consider that the tenants in the greenhouses are fragile underfunded producers of weed which is in goss oversupply and this inventory is being marked down ( to below production cost) all over. The rent will not be paid, and the greenhouses will be empty. It looked like a good idea until you find out that in Colombia you can produce weed at a cost about 10% of that required to produce in greenhouses in the northern hemisphere., and until it became apparent that weed is a commodity and in gross oversupply in Canada at least. Unless and until Canada and the US erect tariff barriers to prevent weed imports, the local producers are up the creek without a paddle. I have been watching IIPR for possible reentry, but the market action is telling me that my analysis is (mostly) right and there is substantial risk that the lease stream will dwindle as tenants go bankrupt and/or default. Stand aside. It could round trip down to $40 or less in the coming months.
And given the deplorable retail market conditions for weed in Canada, and the appalling state of HEXO”s balance sheet and the severe cutbacks and firings at the firm, I think the bottom for HEXO may not yet be in. There may be a bump if the Molson/Hexo beverage makes it to market and meets with widespread acceptance….but it will not be enough to float the boat in Quebec. I have subscribed to Outsider Club and various of its services including Jimmy. Jimmy ( a/k/a The Captain) is on an ego trip and most of the other services offered are equally full of malarkey. Great ad copy, but not real solid foundation in fact or economic reality. Tread carefully. Take a look at HYDRO 666. the oiriginal investors gere ( including the newletter writer) are likely trying to salavage 30/40% of their investment here by selling to newsletter readers in search of the brass ring to riches…..
Hexo is what #7 of the big producers in Canada? all of which have 1 million sq ft or more of grow space available and planes for more? While as of today there is a glut of product for the market and no demand for the product. Companies are laying off employees scaling back on planned expansions renegotiating merger deals or backing out of them completely. Then you have a government that is dragging its feet when it comes to licensing and permitting… what a phucking mess! Not to mention the price of equipment necessary for some of the market sectors to produce their products that are taxed so heavily that the greedy shits put the consumer’s final price paid so high that even the stoners are scratching their head and saying… ya man it sure is pretty and smells good but it doesn’t get ya very high and it’s twice the price of Pablos weed man! Let’s go to Pablos man! Plus he’ll give us some free seeds man. The majority of the future consumers want dialed-in shit. They want to know how high they will get and how long they’re gonna be high. They also want a choice of flavors. Wild bandana banana, Cheech’s cherry froth, Henry’s hilarious Hemroids, Charlies chocolate chip bombers. Oh, I’ve gotta pick the kids up no later than5:30 so just give me a short pink palooka fiz and a puna butter bun. And a very good thing is a hell of a lot of people want it organic. No chemical additives or fertilizers, alla natural. I hope they want it in glass containers too. (good for the ancillary companies like Kushco holdings inc). There is so much overload in the CBD market now that hemp farmers are selling their raw materials almost for cost. Yup, I think maybe it’s a perfect time to cool my heels and sit back or turn around or RUN in a different direction till the smoke settles a little. I believe there is a lot of money to be made yet. But it is gonna take some time and a perty heavy (weeding out) in the garden though. Everyone should do like our STOCKGUM SHOE suggests and invest wearily and wisely. And mostly some were else.
If I had the money I would. But I spent my last $10. on a dime bag and I got some free seeds!
Happy trails, Rick in Pantano, AZ.
yes the ghost town.
Organigram, OGI – check it out! Excellent brand recognition and quality, shipping to all Canadian provinces, started shipping chocolate and improved vape pens in February, will ship powder for beverage within next quarter, low cost producer, making money, excellent management, has been falling with all the other boats.