Before the market opened yesterday, we highlighted Canada’s recent pullback and discussed how developments of this nature are healthy for a long-term rally.
Buy, Buy, Buy The Dips
Buying the dip can be very profitable, but is also very risky. When we analyze and act on these trends, we look at the overall momentum and the recent trend. This strategy has been very successful for Technical420 Premium Members as they were able to capitalize on this recent weakness.
Canadian cannabis stocks bounced higher yesterday and we are not surprised by this rally. The selloff appeared to be overdone and the recent trend supported a rally. Earlier this quarter, we discussed how buying volume and momentum were picking up. This trend has been a profitable one and we think the Canadian cannabis sector has entered a new growth phase.
M&A Is Heating Up
Merger and acquisition (M&A) activity has been picking up and this is a trend we do not expect to slow down. Over the next year, we should see significant consolidation within the Canadian cannabis industry and this theme is already starting to play out.
Earlier this year, Canopy Growth Corp. (WEED.TO) (TWMJF) completed the acquisition of Mettrum Health, a Canadian licensed marijuana producer. This acquisition took place more than a year after Canopy acquired Bedrocan, another ACMPR licensed marijuana producer.
Aurora Cannabis (ACB.TO) (ACBFF) intends to acquire a leading Canadian medical marijuana producer CanniMed Therapeutics (CMED.TO) (CMMDF), with a significant cannabis oil business and international presence (North America, the European Union, Australia, South Africa, and the Cayman Islands).
This would be a massive acquisition and would set the tone for future M&A activity. This growth cycle is just getting started and investors will need to focus on quality licensed producers if they want to capitalize on these opportunities.
Some of the Canadian licensed marijuana producers we consider to be acquisition targets include: Organigram Holdings (OGI.V) (OGRMF), Emblem Corp. (EMC.V) (EMMBF), Supreme Pharmaceuticals (FIRE.V) (SPRWF), Cronos Group (MJN.V) (PRMCF), WeedMD (WMD.V), and Invictus MD Strategies (IMH.V) (IVITF)
Source: Technical 420