ASX weed stocks: hold ’em, fold ’em, walk away or run?

After being cold carded for months now, the weed posse ain’t happy, and a few are asking what they should do?

They want to know who will final table in 2018? .. and who’s been felted? (Yes, it’s a word thanks to Phil Laak, pictured.)

Embed from Getty Images

Hold ’em or fold ’em? – That’s your decision, but we thought we’d try to count the cards as best we can and provide an ASX weed update, something we haven’t done for a while.

So without further ado, let’s shuffle up and deal.

PS: Here’s a guide to poker terms if you’re not familiar with the game.

Who’s headed towards heads-up play?

The much-anticipated legalisation of rec weed in Canada is nearing reality, yet Aussie pot stocks have failed to punch through in recent months.

Chalk it up to good old sector rotation – many seem to have moved weed profits across to mining stocks.

The weed story hasn’t finished playing out, and we can expect another bump towards the end of the year if past patterns play out again.

So far this year we’ve seen the flop and turn. All eyes are now on the river card which has yet to be revealed.

  • K
  • K
  • Q
  • 2
  • 3

Here are the ASX pot stocks we like heading into the back-end of 2018.

Just as in poker, strong starting hands are likely to improve whereas weak ones rarely do.
The stocks we’ve selected are trading nearer to their highs than their lows.

One of the easiest ways to ensure you are on the right side of the market is to buy stocks in an uptrend.

If you don’t have time to trawl through the charts and commentary below, here’s our suggested starting hand for the remainder of 2018

AC8 ♠ BOD ♥ BOT ♣ CAN ♦ EXL

We’ve also thrown in a few outsiders which have caught our eye: CP1 and ZLD

Right there you have the board and a few hole cards. We suggest you make the best 5-card hand you can but don’t go ‘all-in’ on any one name.

  • AusCann Holdings Ltd (AC8.ASX)
    • A
    • J


    Source: MarketIndex

    Canopy Growth Corp have backed this Aussie upstart to take out a big pot, holding over 10% of the float making them the largest shareholder in AusCann. AC8 also received a fair amount of airtime in the recent Four Corners documentary “Green Rush: The race to riches for Australia’s new marijuana moguls”

    Although denied access to Nevil Schoenmakers seed bank despite handing him a wad of shares, the company has managed an impressive 1-year return of close to 300% and is sitting on a a market cap of AUD 197 million.

    Impressive figures.

    Since the spike to $1.85 on January 9th 2018, AC8 has faded a little. As we go to press the stock is off 5%+ intraday and nearing an important support level ($1.25).


    Above: AusCann Managing Director Elaine Darby discusses the groups recent results

  • Bod Australia Ltd (BDA.ASX)
    • Q
    • 6


    Source: MarketIndex

    Killer chart, BOD Australia’s CEO Jo Patterson must be doing something right.

    It appears the non-cannabis related products are currently underpinning the companies growth and strong share price performance. We gave them a mention back in January 2018 and the price hasn’t moved much since then but don’t count them out.

    This has been a sweet ride for anyone who picked up the stock last year and held on.

    Jo has shown that like Annie Duke, she can sit at the table with the big boys and hold her own. If the share price is anything to go by, investors like the cards she’s holding.

  • Botanix Pharmaceuticals Ltd (BOT.ASX)
    • Q
    • Q

    .


Source: MarketIndex

It’s appropriate that BOT are targetting an acne treatment with their latest clinical trial (BTX 1503) given that it seems the winners of the WSOP are getting younger every year.

Peter Eastgate won the 2008 WSOP aged 22 only to lose the ‘youngest winner’ title the following year when Joe Cada, then aged 21, took down the main prize.

Great chart, with a textbook uptrend of higher highs and higher lows.

With pocket queens, investors are sitting pretty and having survived the ennui of 2017 find their chip stack has grown considerably. The ride isn’t over yet, and we expect BOT will go deep in this tournament.

Here’s the link to their most recent investor presentation:

  • Cann Group Ltd (CAN.ASX)
    • A
    • A


    Source: MarketIndex

    With institutional support from Canada’s Aurora Cannabis (ACB.T), CAN have been the star performer within the sector since listing on May 4th 2017.

    The company was recently profiled on the ABC’s Four Corners documentary “Green Rush: The race to riches for Australia’s new marijuana moguls” where we got a glimpse of CAN’s grow room.

    Given the discrepancy between the CAN share price and those of its peers, it seems a ‘takeover premium’ has been built into the price.

    Is ACB swallowing up CAN a fait accompli?

    Not so according to Aurora, who clarified the issue recently:

    EDMONTON, April 30, 2018 /CNW/ – Aurora Cannabis Inc. (“Aurora” or the “Company”) (TSX: ACB) (OTCQB: ACBFF) (Frankfurt: 21P; WKN: A1C4WM) today responds to speculation published in the Australian Financial Review in regard to a potential takeover by the Company of Cann Group Limited (“Cann”), in which Aurora holds a 22.9% ownership interest.

    Aurora wishes to advise that while it has had preliminary discussions with Cann in relation to a potential transaction, no offer has been submitted, and there is no certainty that any formal offer or transaction will eventuate. The Company will update the market in the event of any material developments.

    You wouldn’t want to bet against them but aces don’t always hold up. Some shine has been taken off the share price in recent months with the stock now sitting roughly 30% of its all-time high (ATH)
     
    As the top 20 shareholders control 60% of the stock, the fate of minority shareholders is at the whim of these rounders.

    The stock needs to hold the $2.50 level. The trend is now looking much weaker than it was at the beginning of the year and the major concern here is that the stock may have entered a distribution phase.

  • Elixinol (EXL.ASX)
    • 9
    • J

  • Source: MarketIndex

    Another hemp-heavy player focused on nutraceuticals, dietary supplements and skincare products.

    First time we’ve mentioned them, they have slipped under the radar since listing on Jan 8, 2018 and surging past their $1.00 offer price.

    In fact, EXL shares have not traded below a buck since listing, falling as low as $1.23 during that time.


    Above: EXL CEO’s AGM presentation May 2018


    Joker

    The outsiders

    • Cannpal Animal Therapeutics Ltd (CP1.ASX)

      • k
      • 9

      An underdog surely – the share price has gone nowhere since listing.

      According to their latest 4C Quarterly Cash Flow Report, CP1 reported 5.6 million in the bank as at January 31st and appears to be waiting for decent cards until making a move against more seasoned players.
      The share price won’t stay in this tight range forever. Keep in mind that eventually, every dog has his day.

    • Zelda Therapeutics Ltd (ZLD.ASX)
      • 2
      • 2

      Zelda looks a little lost. The tournament was at the RIO and these guys showed up at Westward Ho. They had a stellar 2017 but haven’t hit a repeat set. Maybe Harry Karelis has an ace or two up his sleeve?



    Joker

    The railbird report

    • ALGAE.TEC (AEB.ASX) – If you’re looking for a 2 ½ cent stock which when recently queried by the exchange as to whether they would continue to have negative operating cash flows issued a “yes, but ..” response, then AEB is the stock for you!

      According to a report in The West Australian, the company is looking to spin out its Uruguayan medicinal cannabis play after receiving funding of up to $7m from New York financier Magna to drive near-term expansion .

    • Atlas Pearls Ltd (ATP.ASX) – When we profiled them back in December 2017 we said: “A pearler (Aussie slang: impressive) of an investment? We’re not convinced yet.”
      The current $0.024 share price isn’t even enough to cover the small blind.
    • Chapmans Ltd (CHP.ASX) – Looks like they were bluffing when announcing their entry into the cannabis space. Current share price $0.003
    • Creso Pharma (CPH.ASX)

      • 7
      • 2

      The meme stays until the share price improves.
      Turns out the SI’s who stumped up $1.10 for their seat at the table were the suckers.
      Only Daniel Negreanu can suceessfully play this hand from here. You’re not him.

    • ESense Lab Ltd (ESE.ASX) – A faction war within the company spilled out of the boardroom and onto the interwebs with an all out brawl resulting in a win for team Israel as the wolves were defeated.
      Meanwhile, investors watched from the sidelines in horror as the stock was suspended for months at 16 cents, only to collapse below 8 cents after trading resumed.
      Only Chuck Norris can win with a hand full of Pokemon cards. Everyone else loses.
    • EVE Investments Ltd (EVE.ASX) – Readleaf would be better off sending Jonathon Howe to Vegas for the WSOP than paying him to continually spruik EVE via his Twitter feed.
    • Medlab Clinical Ltd (MDC.ASX) – Shareholders will not be happy to see the stock trading at 52-week lows and another name is added to the ‘broke a buck but couldn’t stay there’ club. We talked them up not that long ago. Mea Culpa. Like they say: “Nobody is always a winner, and anybody who says he is, is either a liar or doesn’t play.”
    • MGC Pharmaceuticals Ltd (MXC.ASX) – The market seems to have ignored the companies announcement of the inking of a major deal with leading UK retailer Harvey Nichols to carry their MGC Derma and MGC Derma Plus collections..
      The share price has been in retreat for most of 2018, starting the year around the $0.10 mark and closing Friday 15th at $0.064
    • MMJ Phoyotech Ltd (MMJ.ASX) – Ditto MMJ, another name plumbing the depths which has dropped considerably since the beginning of the year, down around 33% since January 2nd 2018.
    • Queensland Bauxite Ltd (QBL.ASX) – Have gone all-in on a hemp play but the share price hasn’t moved in the past 12 months. Investors should have folded on the flop. Many didn’t. Drawing dead.
    • Roto-Gro International Ltd (RGI.ASX) – Made a run to $0.70 at the beginning of the year but short stacked again.
    • Stemcell United Ltd (SCU.ASX) – The share price never recovered after the pump and dump played out in March 2017. The ‘King of Cannabis’ is no longer in their hand.
    • The Hydroponics Company Ltd (THC.ASX) – Having been gifted a ticker from the gods, they seem to have played their cards fairly poorly. Boardroom antics have chipped away at investors stacks and while still in the game the company will need to hit a hot streak to get back on top.

      Your scribe took the opportunity to exit his position in the stock when it recently spiked to the mid-70s in late April.

    Some of these ‘railbirds’ may well deliver profits over the next six months, but how do you choose the best of the worst?

    Pull up the chart of each one and ask yourself “Do I really want to be long this stock?”

    When we went through that very exercise the answer was generally a resounding “No”

    If you’re already long any of the above and are underwater then you’ve got to decide whether to hang on or muck your cards.

    In the words of Kenny Rogers:
    Every gambler knows that the secret to survivin’
    Is knowin’ what to throw away and knowing what to keep.

    The final hand

    We couldn’t wrap this up without reminiscing about Aussie Joe Hachem’s glorious win at the 2005 World Series of Poker.

    Hachem flops a straight and the rest is history as he walks away with the USD 7.5 million first prize (and bragging rights which may have been worth more!)

    Check it out

    Your ASX commentator and poker aficionado,
    –// Craig Amos

    FULL DISCLOSURE: None of the companies mentioned in this article are Equity Guru marketing clients nor does the author own stock in any of them at present.

    Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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