Despite the recent trend in pot stocks, investors are ramping up for Cannabis 2.0. The industry itself continues to attract attention and a lot of investors are buying into these marijuana stocks. With recreational legalization, the industry is full of potential. The latest move comes from Canada once again as they ramp up to legalize the use of cannabis derivatives this month.
No matter where you stand on the topic, this young industry continues to present opportunities. Given the massive pull-back that the sector has seen, now may be a good time to start watching certain marijuana penny stocks. Let’s take a closer look at a few of them ahead of the next industry move.
Pot Penny Stocks To Watch #1 OrganiGram (OGI)
OrganiGram (OGI Stock Report) is one of the pot penny stocks to watch. Although the stock has had a rough time in recent months, OGI stock has seen a few strong sessions. Since peaking in May the stock has dipped 64% but it recently popped. This came after a rating upgrade by Jeffries’ Ryan Tomkins. The analysts increased his price target for the company’s stock to almost twice the current value.
The company has consistently been reporting operating profits despite the massive competition in Canada for a limited number of pot consumers. In the most recent quarter, OrganiGram was among the only two Canadian pot producers that reported an operating profit.
The company has reported adjusted profit since last October when Canada legalized recreational pot use. Over the last few days, shares of OGI have jumped from lows of $2.71 to highs of $3.33 to kick-off the week. Can this trend continue?
Pot Penny Stocks To Watch #2 CannTrust (CTST)
This has actually been a company that I never thought would see the light of day. But big news out today has investors laser-focused on CannTrust (CTST Stock Report) for the first time in a long time. Before seeing this penny stock halted, pending news, CTST stock hit fresh lows of $0.77. However, the real excitement began after the press dropped.
What did CannTrust announce? The company came hat in hand and said that it will “take any and all actions required to both bring the Company into full regulatory compliance and seek the full reinstatement of its licenses.” The company is also taking upon itself further measures to ensure the best products.
It actually said that CannTrust will destroy $65 million worth of inventory and roughly $12 million in “biological assets.” Though this could make for a rough upcoming quarter, the future seems to be important to the new leadership of CannTrust. The only question is can this momentum last while the sector as a whole continues to feel pressure?
Are Penny Stocks Illegal?
This seems to be an odd question to ask. But it is a popular question nonetheless. In short, penny stocks aren’t illegal. Some people think that making several hundred percentage points could be a crime. But you aren’t doing anything wrong by making money with penny stocks. Where legality comes into play is with certain acts taken by insiders or shareholders.
Because these cheap stocks are thinly traded, they can be more easily manipulated compared to blue-chip stocks. Where a company like Apple may be trading billions of dollars a month to move 10-15%, penny stocks can trade a few million in a week and jump hundreds of percentage points. Sometimes these moves are initially triggered by market manipulation and typically end badly for retail shareholders.
This is one of the biggest risks when it comes to penny stocks. Some insiders prey on the “greed factor” of retail investors, hyping up a stock and then selling into the hype. Because of this, almost every article on Transparent Traders will emphasize due diligence is crucial. Don’t ever base investment decisions on anyone but yourself.
It’s ok to monitor what the buzz is but always have a plan before buying anything. Your job is to make money and excitement can often cloud that fact. So while it’s not illegal to buy or sell penny stocks, it is important to understand that these cheap shares can be manipulated by large shareholders. It’s vitally important to have a good grasp on the full spectrum of a company’s market first.
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