Brokerage Recommendations on Pot Stocks are "Laughably Inaccurate"

Written by Nick Hodge
Posted April 18, 2018 at 1:42PM

Careful where you get your weed investing tips.

Recommendations from brokerage and bank analysts, as it turns out, could see your principal go up in smoke.

A report out in the Globe and Mail called some of their advice “laughably inaccurate.”

Let’s have a look-see…

In one of the worst examples, Cormark Securities began its coverage of Aphria (TSX: APH) in December 2017 — after shares had gone up 1,500% — with a “market perform” rating, which is the equivalent of a “hold.”

So it initiated coverage by telling clients NOT to buy shares.

Shares of Aphria then went up 55% over the next month.

Cormark then changed its tune, upgrading the stock to “speculative buy” and increasing the price target by nine dollars.

This turned out to be at the exact same time marijuana stocks put in their short-term top.

Aphria is down as much as 64% since January, when Cormark raised its price target and told clients to buy.

And that was after it missed out on a 1,500% rally by not covering the stock at all!

Aphria April 2018That’s only “laughably inaccurate” if you don’t have money on the line.

And as the Globe points out, this is not an isolated example.

It looked at 26 analyst recommendations by five brokerages for six marijuana stocks.

Nearly half (46%) of the calls either lost money or missed rallies.

Canaccord, for example, has botched its coverage of Canopy Growth (TSX: WEED), which has become the “go-to” name in the sector. It began with a “hold” rating in March 2017. And after reiterating its “hold” rating… and then telling clients to “sell”... Canopy shares are up 135%.

Now let’s see how Jimmy Mengel, who runs our Marijuana Manifesto, did with those two names...

He had his readers in Aphria as early as March 2017 — meaning it's been up as much as 294%. If you’re keeping track, that’s better than losing 64% with Cormark.

He did even better with Canopy, first telling readers to buy in July 2015 when shares were just C$1.86. And then locking in half his gains when they got to C$17.30 for an 830% win. The other half of that position is now up more than 1,525%.

Canopy Growth April 2018Jimmy told readers to buy Canopy again in his Marijuana Manifesto in March 2017. That position is up 174%.

And how about overall?

While the Globe and Mail found 46% of professional analysts' marijuana stock calls to either be losers or miss rallies…

In 2017, Jimmy closed just two stocks: Future Farm Technologies for a 428% win and Helix TCS for 220%.

His current open portfolio has 17 positions in it. Of the 11 of those that are up, six are up more than 100% (including Canopy).

While these banks and brokerages only began covering the sector in 2017, Jimmy has been entrenched in the sector for years. He started what is widely regarded as the first newsletter dedicated to the space.

And as I showed you today, he’s beating the pants off the “laughably inaccurate” recommendations at brokerage houses.

He’s been ahead of them for years and will continue to be as the marijuana sector matures.

See what he’s recommending now.

Call it like you see it,

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Nick Hodge

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Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

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Investing in Marijuana Without Getting Burned