Here’s an update on some recent purchases in my portfolio. For this round, I have one purchase adding to my largest position in the portfolio and two new positions and a new endeavor in a new sector.
First purchase: I added to my position in Kirkland Lake Gold (KL.TO) after the continued pressure. The gold market is seeing headwinds in the last few days and KL got beaten down on no news. In fact, the cards are all in favor of KL outperforming and leading the pack in the mid-tier sector as the amazing news keeps flowing. The financials are stellar, the flagship mines are running smoothly, grades are also improving on a regular basis, new discoveries provide added tailwinds, new partnerships are being formed securing future production. It is really hard not to like this company. Its already the single largest exposure I have in my portfolio and I continue to average UP — something that most investors do not do. I added 100 shares of Kirkland Lake Gold @ CAD$15.25.
Onto the other new purchases in my portfolio. One sector that has seen great growth in the recent months has been the weed/marijuana/cannabis stock industry. This sector has been on fire lately thanks to the Liberal government in Canada well on track to legalize marijuana at the federal level for recreational use. The rec use legislation is expected to be in effect starting July 1, 2018, so there has been a scramble in the industry to get the production up and running before ‘Launch Day’. Keep in mind that there is already a decent sized population that uses marijuana for medical use and is prescribed for pain management for various diseases.
Its a vast and intriguing field and I have just started researching the space. I see lots of stocks have run up in anticipation of future revenue with nothing to show for in current quarterly/annual reports. Companies have reached unicorn status ($1B+ market cap) while having only tens of $millions in revenue. So, there is a lot of speculation in the space, but its a space that I do not want to ignore completely. Recently, this website featured Save Stacks with a guest post, who shared how he is supercharging his financial independence with weedstocks. If you haven’t read the post, I highly recommend checking it out.
I also came across this amazing chart last week and provides a great view of the space. Image credit goes to Canadian Greenscape.
I have opened with two small positions in this space.
First purchase in this sector was in Cannabis Wheaton Income Corp (CBW.V) with 1,000 shares @ CAD$1.05. Cannabis Wheaton, a knockoff name of the Silver Wheaton/Wheaton Precious Metals ;), follows the same business model, i.e., a streaming company. CBW provides upfront financing for producers in the space, and will take a stake in the future production and intends to be a cash flow machine. In the precious metals sector, I have often recommended newcomers to take the route of streaming/royalty businesses such as Franco Nevada (FNV) or Wheaton Precious Metals (WPM), as it is relatively safe way to get exposure into the sector, while you learn the ropes. I have taken this similar approach while I get exposure in the weedstocks sector. The following is a summary of CBW’s exposure and the partnerships they have with the licensed producers (LP). For more details, see the investor presentation.
Second purchase: I decided to get exposure to an individual LP in this space. I initiated a position in ABCann Global Corp (ABCN.V) with 1,000 shares @ CAD$1.19. ABCann has the approval from Health Canada, so its a LP, has targeted the medicinal aspect and will be expanding to target the rec use subsector. The company has international exposure (in addition to Canada, the company is targeting Germany/Europe and Australian markets), has a 1,000 KG production capacity and looking to expand upto 40,000 KG/yr capacity, has a management team with a track record to build and grow weed facilities etc. More info can be found in the investor presentation.
What do you think about these purchases? Share your thoughts below.
Full Disclosure: Long all stocks mentioned. Our full list of holdings is available here.