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FILE - This Nov. 7, 2012 file photo shows a medical marijuana plant at a dispensary in Seattle. Tied to an unpopular president and his signature health care law, Democrats in the nation’s largest swing-state see the prospect of legal medical marijuana as a rare source of hope and high voter turnout in this year’s midterm elections. (AP Photo/Ted S. Warren, File) (Ted S. Warren/AP)
FILE - This Nov. 7, 2012 file photo shows a medical marijuana plant at a dispensary in Seattle. Tied to an unpopular president and his signature health care law, Democrats in the nation’s largest swing-state see the prospect of legal medical marijuana as a rare source of hope and high voter turnout in this year’s midterm elections. (AP Photo/Ted S. Warren, File) (Ted S. Warren/AP)

Schizas’ Mailbag

Medical marijuana stock is a risky bet for a retirement portfolio Add to ...

Hi Lou,

I am very “wet behind the ears” when it comes to investing in the stock market, I have a daughter and a son on the way (may name him Lou if this all goes well). I really want to get on the right path for our retirement so we don’t become a burden on them. I was hoping you could look at GW Pharmaceuticals.

Thank you very much,

Jeff

Hey Jeff,

Thanks for the assignment.

What I can see from the start is that you are taking on some risk which you may have to give further consideration as you refine your personal investor profile and risk tolerance.

GWPH is focused on the development of plant-based cannabinoid therapeutics and has commercialized a treatment for MS spasticity they have branded Sativex. The company is managing two phase-3 trials in the United States with partner funding that could open the door to the world’s most lucrative pharmaceutical market. Cannabis is a unique source of over 70 cannabinoid molecules which may lead to new product platforms. THC is the only cannabinoid molecule producing psychoactive effects.

An investigation of the charts will provide you with further particulars regarding this investment.


The three-year chart tells the story of explosive growth after the May 2013 initial public offering at $8.90 a share. There are only 19.7 million shares outstanding so if you want to own the stock you’ll have to pry it out of the owners’ hands with a mitt full of cash. At this point the stock is building a base near $80.00 which has to be viewed positively.

When a stock takes off like this it tends not to build support along the ascent. That can lead to quick and painful declines if investors have not shown a propensity to buy on pullbacks. Another interesting continuation pattern that surfaced in April and May is the stick and pennant which signalled the run to the 52-week high of $111.46 in early July.


The MACD and the RSI on the six-month chart have produced a number of buy and sell signals leading to profitable trades. At this juncture the momentum indicators are not providing clarity as to direction. The best case scenario for a new leg up would be a break above $90.00 where some resistance has formed.

The fourth-quarter report is scheduled for release in November. What you also need to track with bio-tech companies is their progress through clinical trials and presentations released during the fall conference season. Also keep in mind that GWPH is burning cash as it works to move their cannabinoid molecules from the lab into a marketable product in the United States.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

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