What’s “Tom Gardner’s favorite marijuana stock?”

What's the Motley Fool touting as "The Amazon.com of Marijuana" in ads for their new Marijuana Masters service? They say it's "up 215% in the past year... And we think it's just getting started."

By Travis Johnson, Stock Gumshoe, October 9, 2018

I guess now pretty much everyone has jumped aboard the Marijuana bandwagon — the Motley Fool is a bit later to the party, having just announced its Marijuana Masters investing service ($1,499, no refunds), helmed by David Kretzmann (a new name to me), so let’s see what it is that the typically much more mainstream Foolies are pitching…

“Tom Gardner’s favorite marijuana stock is up 215% in the past year…

“And we think it’s just getting started

“Read on to learn more about the little company Tom compares to Shopify… and how you can secure instant access to my top 10 marijuana BUY recommendations!”

And apparently they’re starting off with a 10-stock marijuana portfolio…

“Today, I have 10 official marijuana BUY recommendations waiting for you directly inside Marijuana Masters.

“One of which was actually brought to my attention by Tom Gardner himself.

“In fact, it’s Tom’s No. 1 marijuana company in the world at the moment.”

So what else do we learn about it? Apparently Kretzmann has dug into Tom’s idea and likes it…

“But knowing just how bullish Tom was on this tiny marijuana stock, I dug into the company’s financials and decided it deserved a spot among our initial 10 official recommendations inside Marijuana Masters.

“Tom calls this stock a ‘first mover’ with ‘a great balance sheet’ that compares to Shopify, a favorite stock of his that’s returned 408% since he first recommended it in July 2016. Of course, we can’t promise performance like that for this recommendation, but this stock leaves us with lots of reasons to feel bullish.”

Any other clues?

“With inside ownership above 30% and dedicated co-founders still at the helm, I’m personally convinced that this company can turn its early lead in this space into a long-lasting competitive advantage as it expands the scope of its products and scale of distribution.”

We also get a little taste of Kretzmann’s big picture enthusiasm…

“… why now?

“As you may know, on Oct. 17, Canada will become the first major country to legalize recreational marijuana on a national level. Which means, just two weeks from today, Canadians will literally be able to walk into a store and purchase cannabis just as if it were beer.

“And then right on the heels of that are the U.S. midterm elections on Nov. 6. Four states are voting on marijuana laws, and many others have bills in progress whose fate could be determined by the election’s outcome.

“With these two major catalysts at hand, I believe this is a decisive moment for investors like us.”

So… what’s the stock? Here are the rest of our hints:

Marijuana Masters Pure Play Stock #1 – ‘The Amazon.com of Marijuana’

“Just like Amazon.com, this company aims to be ‘your everything cannabis store.'”

And a few more details…

“With a whopping 32 different e-commerce sites operating across 20 countries, and 1.5 million users in its database, it’s already one of the most popular cannabis brands out there.

“And that doesn’t even take into account its telemedicine app, which allows individuals to receive online video consultations with licensed health care professionals and obtain a medical marijuana prescription.”

The stock is apparently up 1,200%, too… though that doesn’t necessarily make them stand out as a marijuana stock, not in a sector where nuttiness is the new normal (at least for now), and they seem to be monkeying around with time periods a bit if they’re describing it as having risen both 215% and 1,200%.

Any other clues?

We do get this:

“… the most exciting part of the ‘Amazon.com of Marijuana’ is it’s on the brink of becoming the first company to sell cannabis via an online marketplace.”

So who is it? Thinkolator sez this must be: Namaste Technologies (N.V in Toronto, NXTTF OTC in the US), which is trying to build a marketplace first for medical marijuana then, perhaps, for recreational retail sales in the future. They do indeed match those clues, claiming 32 e-commerce sites in 20 countries and a 1.5 million user database, along with a Teladoc-like medical consultation service (NamasteMD) that lets you get your medical marijuana prescription with a virtual doctor visit, and the Shopify and Amazon comparisons make some sense given Namaste’s focus on growing an e-commerce platform for Canadian medical marijuana (though plenty of companies are talking about using Shopify itself to build their own marijuana stores, too).

There has been a lot of controversy over Namaste recently, moreso even than the other richly-valued marijuana stocks, mostly because management has done some really dumb things (particularly hosting a wild party for shareholders who pledged not to sell for 90 days… even as executives were reportedly selling shares)… and Andrew Left at Citron Research has a very aggressive short/fraud analysis out there right now, so if you’re going to consider Namaste, you should at least review his short thesis and Namaste’s response. I don’t know if Tom Gardner still likes the stock or has an opinion on the controversy, but clearly David Kretzmann is a fan at current prices.

If you want to read those competing reports, Citron’s two fraud allegations and the argument that Namaste will never get a Nasdaq listing (and might be delisted by the TSXV) and should be worth about 25 cents a share are here and here, and Namaste’s response is here.

Andrew Left is a bit of a blowhard, to be sure, and pushes his arguments very aggressively without always being right… but he’s also a short seller, so he’s careful with his facts and has a lot more at risk than I do, so I take his arguments seriously. And in this case, frankly, his accusations are a lot more compelling than the company’s tepid and pretty generic “nuh uh, we didn’t do anything wrong” response. That doesn’t mean Namaste is definitely a fraud, but I don’t see a lot to make them compelling compared to other Canadian marijuana companies, and I don’t like most of the rest of them at current prices, either… so it does mean that it costs me nothing to not buy the shares, and that’s what I’ll be doing.

The positive thing, I suppose, is that this isn’t a grower… they do have some kind of investment in a growing operation, and they primarily sell vaping supplies right now, but their goal is to be an e-commerce leader in medical marijuana, and essentially an online retailer of marijuana that’s produced by other companies — so they might not be as impacted by fluctuating wholesale prices in the early years as the growers could be (particularly the smaller or higher-cost growers)… but then they also will presumably have difficulty in establishing their own brands, since they won’t control their inputs, and they do need good grower relationships (Tilray dropped them, for example, after Namaste got in trouble with Canadian regulators over their marketing and their stupid “pledge party” a few weeks ago).

The goal of turning their CannMart e-commerce platform into the “next Amazon” is a delightfully lofty one, but there were hundreds of “might become Amazons” in the mid-1990s, and most of them aren’t with us any more, so be careful about how much survivorship bias you use in your rear-view mirror. Amazon itself might not have made it if they didn’t get a big chunk of financing right before the dot com crash. (If that’s before your memory, they did a $1.25 billion convertible bond financing in 1999 that lots of people thought was crazy at the time, not long before experiencing a 90%ish fall in the stock price.)

There are a few other ideas teased in the ad, but that’s the match for “Tom Gardner’s favorite” … I’ll see if I can dig up those other answers for you, but, as you’re probably well aware, I’m not all that enthusiastic about most of these companies at this point — is the Motley Fool’s decision to enter the space just another opportunistic publishing gambit, or does it mean that marijuana is ready to really go mainstream as an investment?

You’ll have to make your own call on that, but when it comes to my portfolio I’m being very cautious in this space. The business overall will clearly be quite large and the top line numbers will probably grow quickly if there isn’t a major regulatory setback in the US, but there’s a lot of junk out there… and in the closely-watched Canadian market we’ve got a massively financed and enthusiastic industry that’s perfectly capable of wildly overproducing and crushing wholesale prices for growers. Most of these dozens of heavily hyped companies probably won’t exist in a few years, or will be shadows of their current selves, so if you’re investing in the sector make sure to understand what makes your company financially viable or likely to succeed — part of that calculation will just be financing, the companies that raise hundreds of millions of dollars at these rich valuations will survive a downfall more easily because they’ll have enough money to make payroll when stock prices hit a soft spot, but predicting the actual eventual victors who have the best retail presence or the best brands or the lowest cost structure probably requires a lot of foresight and luck at this point.

And if you’ve got thoughts to share on your favorite, or want to challenge Tom Gardner to a virtual marijuana stock duel on this point, well, feel free to comment below.

Disclosure: I own shares of Shopify, Amazon and Teladoc among the companies mentioned above. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.


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90 Comments on "What’s “Tom Gardner’s favorite marijuana stock?”"

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steveflick
Irregular
547

I believe the Thinkolator is spot on. You would have thought Motley Fool would have done a lot more research and come up with some other stock(s) to promote for their new service. I would not buy the subscription service, do your own research – including right here at Stock Gumshoe – use the search field, nor would I buy Namaste.

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saint stephen
Irregular
286

I subscribed to the Fool newsletter for awhile. I lost money on every one of the stocks I got on their advice. No thank you.

notlaw
Irregular
16

As did I. Still hurting from the under Armor recommendation

stuffasaurus
Irregular
0

Head bent hat in hand, he said, “As am I”. The former fool, said.

Mc8541ss
Guest
0

Stitch fix got me.

Tom M
Guest
0

The best pot stocks will be the ones the gurus miss. Better off putting your $1500 toward a few well researched names the you find fascinating.

rexstorm
Irregular
20

I find it hard to believe that MF is mentioning Nemaste as a stock and wants someone to pay $1500 for their ghost best pot stock.
I bucked MF long ago and bought CROX at $4 while MF was busy bashing it.
Look who lost out.
Today, I would put mt $1500 into TRXC and wait forever to double it instead.

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sooku
Guest
0

No thanks. TRXC is over-hyped and ready for a big short.

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4889
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precisionvision
Irregular
58

What’s the relevance to TRXC in this disucssion?

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4889
Hubie337
Guest
0

Come on, there is a direct correlation between robotic surgical devices and pot stocks. Everyone knows that.

CryptoInvestor
Irregular
110
I agree. No to Namaste. There are better places to invest. I just consolidated 18 positions into 13, and have substantial capital in the space. There are only two “blue chips”. That’s Canopy Growth CGC and Aurora ACBFF. Of the two CGC has run fast and hard. ACBFF has not, but appears poised to. With a strategy of global dominance, a deep focus on CBD, and the near-term catslydt of a US stock listing on NYSE in late October, ACBFF is the one to buy. Aphria APHQF is arguably third in line, and definitely one to own, no US listing… Read more »
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gthorne
Irregular
78
I am doing more or less the same as CryptoInvestor, but probably in not the same volume. But like him, I agree the big two are Canopy and Aurora, and that’s where most of my pot money is. Like him, I recently just weeded down my holdings from 11 to 5. My third largest is Cronos, but I do agree with him that Aphria is solidly up there as well. I did own Aphria early on and sold for a modest profit, but think the time has come to buy some again on dips. My most recent purchase, just a… Read more »
H Morse
Guest
0

Sweet pun you made there, gthorne.

olliesrevenge
Irregular
9

Fantastic post, thanks for your insight.

rmackintosh
Member
33

a

JackInTheBox
Irregular
45
Travis you are a gem!! (i know, its nothing new). I think when constellation brands (stz) made a bet on Canopy, the whole industry became official and legit. They are a fortune 500 company, with a industry that is being threatened by the cannabis industry. I’m not smart enough to know which Marijuana stock will be the big winner in the end. So i put a very small position in all that make sense to me. so although a few of my marijuana positions are down 50%-60%, the ones that are up 160% make up for them. There are also… Read more »
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ajetjock
Guest
0

Who cares about a FOOL’S opinion ?

My favorite weed stock BAR NON is IIPR.

Very safe concept. Just bought a Michigan property. EXTREMLY low float and…pays DIVIDEND !

It can hardly get better than that.

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oregon don
Guest
0

AMEN

Raye
Guest
0

Thanks for the mention of IIPR, that was not on my radar, and surprisingly up $2 today when virtually everyone else went down. I am sellling my Namaste ( I had high hopes for their medicinal work but seems as if there corporate values are pretty suspect).

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maraarto
Guest
0

what is the name of this company? cannot find the symbol

steveflick
Irregular
547

are you asking about IIPR? the first two characters are capital i’s, not l’s. Name is Innovation Industrial Properties, a REIT that rents out warehouses for cannabis grow operations in US.

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Britt
Guest
0
I’m just not sure how to feel about Motley Fool. They seem to have some good ideas, but I’m turned off by the way they try to sucker you into multiple services. I did sign up for three years of Rule Breakers, but only because it was a substantial bargain compared to what they usually try to get you to pay. Every time they come up with a new service, they have this round table talking it up and then they tell you their price and how you ought to be amazed at what a value it is. If I… Read more »
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Mc8541ss
Guest
0
Can’t figure out why all the different services. I paid for stock advisor. That will be the last penny they get from me. If I’m paying for stock advisor, I feel I should be getting the best advice on stock. But wait, if I pay more I get better advice? Or, every time something new or hot comes along they put that into another service, charge more money. If you think your advice is worth more than $100 they should just charge that from the start. Now they have a new deal on what stocks to buy in any kind… Read more »
Neil McTavish
Guest
0

Yes, the tease is Namaste. I think in the end there will be probably about a half dozen survivors in the MJ space once the dust settles. One of those, in my opinion, will be CannTrust Holdings Inc. They are profitable and growing their patient base in the medical MJ field. Canopy Growth trades at around 150 x sales… Canntrust trades around 40 x sales.

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CryptoInvestor
Guest
0
CannTrust has potential. I owned it for awhile. I bought around $7 and sold when it bounced back down from $10. I was a bit concerned when it couldn’t break through the double top there, but I may have been impatient. It’s either to $11 or $8 near-term IMHO. I didn’t know of a catalyst either. In all honesty, I really just wanted to own more Aurora. I think ACBFF is going from $10 to $20, and maybe by Jan. The US listing may even take it there by Nov. And I think Aphria is next in line, but no… Read more »
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Lorne
Guest
0

There is talk in Canada about doing away with medical marijuana once all marijuana sales are legalized. As well, Shoppers Drug Mart, Canada largest drug store chain (and owned by our largest grocer, Loblaws) is applying to sell medical marijuana. If either goes through, a company such as Nameste could be significantly affected and not in a good way.

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Rog
Guest
0

No way would I bet against Andrew Left. His shorting record is formidable

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Joe Esty
Guest
0

Really. Take a look at Chemours (CC) and Transdigm (TDG). There are plenty more.

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Normally Dubious
Irregular
80

Left identified INGN as his next short target, May 24 when it was at 170. It momentarily dropped to 157 but then went on to peak at 278 before falling to current 210. So I do with Citron what I used to do with Zacks, act contrary to their recommendation.

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chasingscott
Irregular
9

I just saw that there is a class action lawsuit filed today against Namaste. It says the company made false and misleading statements. This cannot be a good thing for the stock. TVRN is tanking 65% today because of a class action suit and doubts brought to light from the FDA. I for one am staying away from NXTTF.

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Debbie
Guest
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IMPORTANT INVESTOR REMINDER: The Schall Law Firm Announces the Filing of a Class Action Lawsuit Against Namaste Technologies Inc. and Encourages Investors with Losses in Excess of $100,000 to Contact the Firm

BusinessWire

mykie76
Irregular
22
I have been so well served by TMF that I have to state my positive bias, since others have stated their negative bias. First, no one gets them all right and if they say they do, we all know they are BS’ing. But I’ve found TMF to be the most transparent, honest and hard working bunch of the over 2 dozen services I have tried over the years. That said, I think Tom Gardner hasn’t made a good choice here and I say that cautiously since so many times in the past I disagreed and I turned out to be… Read more »
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