Looking to Make a Buck From Pot Stocks? Read This:
In today’s market, few things excite investors more than a pot stock on the rise.
And that shouldn’t come as a surprise. Over the past several weeks, the stock market enjoyed a decent rally, with weed stocks being some of the biggest gainers.
To give you an idea, the North American Marijuana Index, which measures the performance of 46 leading cannabis stocks operating in the U.S. and Canada, surged 31% year-to date. This was substantially better than the S&P 500 index’s 11.6% gain during this period.
The neat thing is, while the pot stock index climbed quite a bit, some of the individual tickers were up even more. For instance, Supreme Cannabis Company Inc (OTCMKTS:SPRWF, TSE:FIRE) stock shot up 39.4% since entering the new year.
And that could be the beginning of something much bigger.
Let me explain.
A Marijuana Stock Most People Have Never Heard Of
Compared to the big pot companies like Canopy Growth Corp (NYSE:CGC), Supreme Cannabis Company Inc is a much lesser-known name in the marijuana industry.
Still, while the name Supreme Cannabis might not ring a bell for most people, its wholly-owned subsidiary, 7ACRES, is a well-recognized name in the business.
7ACRES is a licensed cannabis producer in Canada with a 440,000-square-feet facility in Kincardine, Ontario. Last year, 7ACRES was awarded “Brand of the Year” at the Canadian Cannabis Awards. (Source: “7ACRES Recognized as Brand of the Year by Cannabis Awards,” Supreme Cannabis Company Inc, December 3, 2018.)
Having a top-tier brand has allowed Supreme Cannabis to build a sizable distribution business in Canada—a country that legalized recreational marijuana for adult use in October 2018.
The company has entered into recreational pot supply agreements with eight of the 10 Canadian provinces: Ontario, British Columbia, Alberta, Manitoba, Saskatchewan, Nova Scotia, New Brunswick, and Prince Edward Island. (Source: “Investor Overview,” Supreme Cannabis Company Inc, last accessed March 1, 2019.)
Notably, in September 2018, Supreme Cannabis signed a supply agreement to provide dried cannabis to a subsidiary of Tilray Inc (NASDAQ:TLRY), which is one of the largest companies in the pot industry. The agreement is estimated to have a value of CA$12.0 million. (Source: “Supreme Cannabis Signs $12m Guaranteed Supply Agreement with Tilray,” Supreme Cannabis Company Inc, September 26, 2018.)
Then, in November, the company entered into a three-year agreement with MediPharm Labs Corp., a licensed cannabis processor that focuses on cannabis extraction and producing pharmaceutical-grade cannabis oil. Under the agreement, MediPharm will help Supreme Cannabis launch its own cannabis oil product line. (Source: “Supreme Cannabis to Launch High End Cannabis Oil Products for Adult-Use Market,” Supreme Cannabis Company Inc, November 13, 2018.)
As you’d expect from a soaring weed stock, business has been going quite well at this Toronto, Ontario, Canada-based cannabis producer.
According to its latest earnings report, Supreme Cannabis generated CA$7.7 million of revenue in the quarter ended December 31, 2018, representing a whopping 359% increase year-over-year.
While the company reported a net comprehensive loss of more than CA$1.5 million for the quarter, that loss was much narrower compared to its net loss of CA$2.0 million in the year-ago period. (Source: “Supreme Cannabis Announces Q2 2019 Financial Results,” Supreme Cannabis Company Inc, February 12, 2019.)
Needless to say, most industries can’t pull off a 300%+ revenue increase. If the company can keep up its momentum, it could attract more growth-seeking investors.
Supreme Cannabis Stock Chart
The below chart shows SPRWF stock’s daily performance in the past six months.
As you can see from the chart, Supreme Cannabis stock tumbled during the market sell-off in the fourth quarter of 2018 but has made a very strong comeback in 2019.
Chart courtesy of StockCharts.com
Here’s the neat part: on the above chart, you can see that SPRWF stock’s 50-day moving average (the blue line) has just crossed above its 200-day moving average (the red line). In technical analysis, this is called a golden cross, which indicates the potential for a major rally.
Also, in the top section of that stock chart, we have Supreme Cannabis stock’s relative strength index (RSI). That statistic measures the strength or weakness of a stock on a scale from zero to 100, based on the closing prices of a recent trading period. Right now, the index is almost at 56.4, indicating that the gains are greater than the losses.
Put it all together and you’ll see that Supreme Cannabis stock has both fundamentals and technicals on its side. And yet Supreme Cannabis Company Inc’s shares traded at just $1.53 apiece at the time of this writing.
In a market where enthusiasm is high for marijuana stocks, it would be hard for SPRWF stock not to make a big move to the upside.