Pot Stock Gambles - Getting Fatigued

[A Fella from Stella]

About 5 years ago I began buying up shares in pot stocks. Not just marijuana businesses like Medical Marijuana Inc., but also producers of hardware for farming like GrowLife, makers of alternative products like Puration Inc (they have a CBD water) and Hemp Inc, which makes a HazMat cleanup product.

PROBLEM 1: All of these businesses have real sales, and are diverse in a good way, I think, but I haven't made any money. Honestly, I thought they'd at least have spiked up with ongoing legalization, but they have not.

PROBLEM 2: In 2003 I bought Netflix stock and then sold it since it didn't do anything that week. Had I just stayed the course and hung out, I might have made 100x my money. I also bought Ford stock right after the auto bailout, and sold for a 30% gain when I could have made 500%.

PROBLEM 3: I don't know what to do right now.

Is anyone else in the same boat?

Does anyone have any insight?

EDITED TO ADD: I have about $30,000 invested so far, and would like to keep adding, but have stopped for now.

[mjr]

Buy and hold index investing doesn't float your boat then ?

You're looking to get rich quick by speculating on stocks ?

[KBecks]

Do you want to gamble?

If you want to be an investor, then learn about investing. 

Does the 30k in pot stocks represent the majority of your liquid net worth?  If so, if I were you, I would look at diversifying.

Index funds are fine.  If you want to be an individual stock investor, it takes years to learn. If you are buying quality companies, you have to learn to hold and think long-term.  Years, not weeks.

Also, keep an investing journal.

[Freedomin5]

Most of the people on this forum probably can’t help you, as most of us subscribe to buy and hold index investing according to our investment personal statement. Why are you even gambling like this? Have you read what MMM has written about his investment philosophy? Have you read jlcollins’ series on investing?

What does your investment personal statement (IPS) tell you to do?

[A Fella from Stella]

You're looking to get rich quick by speculating on stocks ?

I wouldn't mind if it wasn't so quick, just that it could happen.

Part of why I'm doing this is because I'm trying many different things. I have:
 - a career
 - a project that could pay off big, but may just enrich me personally
 - workplace retirement account
 - separate retirement account
 - this stock account
 - rental real estate

[A Fella from Stella]

Do you want to gamble?

Does the 30k in pot stocks represent the majority of your liquid net worth?  If so, if I were you, I would look at diversifying.

Also, keep an investing journal.

Truthfully, I probably do want to gamble. I'm not day trading, so it's not as pervasive, but these are gambles, hedged by the fact that they are real companies with real sales.

$30k is material to me cash-wise. Thank you for asking so that I can consider that it should be reduced.

An investing journal would be helpful. Thanks again.

[A Fella from Stella]

Most of the people on this forum probably can’t help you, as most of us subscribe to buy and hold index investing according to our investment personal statement. Why are you even gambling like this? Have you read what MMM has written about his investment philosophy? Have you read jlcollins’ series on investing?

What does your investment personal statement (IPS) tell you to do?

I've heard JL Collins interviews and like him. I've set my kids up in those accounts.

I've been buying single stocks since I was very young - maybe 12-years-old. Writing this now, I realize that I don't really have anything to show for it. It's possibly little better than having been a huge pro sports team fan. But without the sports trivia.

[KBecks]

Go check out Saul's Investing Discussions at the Motley Fool discussion boards.  High growth, higher risk investing and a lot of very smart people over there.  Mostly SAAS companies.  Swim at your own risk.

Here is a link.  Be careful out there and don't move too fast, don't get overconfident, but this type of investing sounds like it will fit your style and there is a large knowledgebase that you can read through.
https://boards.fool.com/my-portfolio-at-the-end-of-june-2019-34239810.aspx

[A Fella from Stella]

Go check out Saul's Investing Discussions at the Motley Fool discussion boards.  High growth, higher risk investing and a lot of very smart people over there.  Mostly SAAS companies.  Swim at your own risk.

Here is a link.  Be careful out there and don't move too fast, don't get overconfident, but this type of investing sounds like it will fit your style and there is a large knowledgebase that you can read through.
https://boards.fool.com/my-portfolio-at-the-end-of-june-2019-34239810.aspx

thanks for the link. I appreciate it.

[Sciurus]

I took a glance at the stocks that you mentioned and they are all penny stocks.  While you are right that they all have sales they are still hemorrhaging money every year and they are clearly struggling to grow right now.  How well do you understand the market that each company is in?  Can you read their balance sheets?

I get the impulse to invest in pot stocks with the wave of legalization, however millions of people had the same idea.  Many companies had time to try and enter this market early so there is an abundance of competition.  This is the opposite of what happened with Netflix. Netflix created a new market that no one else saw and thus had no competition in it for years.  Do any of the companies you invest in have a new market with no competitors? Have you looked at/for their competitors?

Unless you have some sort of insight as to why one of the companies you mentioned will be able to out-compete the host of other pot based companies I would consider any investment in them just a gamble.  I follow your initial thought process of investing in the new pot market and only buying companies with sales however I think more research and thought is needed.  Also, when researching investments you need to mentally keep your mind open to the possibility that none of the companies you are researching are worth investing in. 



Personally I would love to know more about your experiences with these companies over the past 5 years of investing in them.  What makes the stocks move up or down? is it news is it earnings releases?  Were there times when the stock did the opposite of what you thought it would do and why?  Have you seen a pot stock go from pennies/share to dollars? How did that happen? I'm always on the hunt for more knowledge/experience :)



 

[Sciurus]

Go check out Saul's Investing Discussions at the Motley Fool discussion boards.  High growth, higher risk investing and a lot of very smart people over there.  Mostly SAAS companies.  Swim at your own risk.

Here is a link.  Be careful out there and don't move too fast, don't get overconfident, but this type of investing sounds like it will fit your style and there is a large knowledgebase that you can read through.
https://boards.fool.com/my-portfolio-at-the-end-of-june-2019-34239810.aspx

Thanks for this link, there is some good info in there.  Its always a good sign to see someone using EV/S in their analysis.

[Financial.Velociraptor]

I'm one of the heretics here who thinks it is possible for a retail investor to beat the market.  I blog about one approach.

Betting heavily on "moonshot" stocks is not a very good strategy.  You would have been better served to put a few hundred dollars into a 50 or so stocks on your theme rather than going big on things that are most likely never going anywhere except down.   Speculating is for just a few percent of your portfolio.  You probably lose that 2-3% but you do quite well if you get a single 100 bagger. 

I'll be glad to answer questions later publicly or by private message.  But for now I have to drop someone off at the airport.  Later.

[A Fella from Stella]

I'm one of the heretics here who thinks it is possible for a retail investor to beat the market.  I blog about one approach.

Betting heavily on "moonshot" stocks is not a very good strategy.  You would have been better served to put a few hundred dollars into a 50 or so stocks on your theme rather than going big on things that are most likely never going anywhere except down.   Speculating is for just a few percent of your portfolio.  You probably lose that 2-3% but you do quite well if you get a single 100 bagger. 

I'll be glad to answer questions later publicly or by private message.  But for now I have to drop someone off at the airport.  Later.

I didn't intend to have so much invested, I picked something like 10 stocks, added $200 to a different one each month, then dropped a few along the way.

There were a couple times I correctly guessed they had spiked, so I sold, then bought back in, but the gains aren't huge (or really gains, since I didn't keep the money).

Part of me thinks I should sell anything over 100k shares in any company and buy something solid that pays dividends with the leftover.

Or maybe do a home improvement.

[A Fella from Stella]

..............they are all penny stocks.....................hemorrhaging money every year.................Can you read their balance sheets?

Personally I would love to know more about your experiences with these companies over the past 5 years of investing in them.  What makes the stocks move up or down? is it news is it earnings releases?  Were there times when the stock did the opposite of what you thought it would do and why?  Have you seen a pot stock go from pennies/share to dollars? How did that happen? I'm always on the hunt for more knowledge/experience :)

I initially thought I could luck into a wave, but rode most of the stocks down as I bought in a little at a time. It was odd. There was a bunch of legalization in the 2014 elections, but the stocks went down even on that NEWS.

Puration, Inc. I am up on because I bought in before they landed a distribution deal with a chain of high-end wine/spirit stores in Texas: https://www.prnewswire.com/news-releases/puration-announces-everx-cbd-sports-water-free-samples-at-specs-wines-spirits-and-finer-foods-retailer-on-memorial-day-weekend-682655741.html

Hemp, Inc. has a HazMat cleanup product, and they run farming seminars. HUGE CONCERN: I reached out to them last year about selling their product, and while they were so great in talking to me, they ended up including me on some inside emails that made me see that it's not well-run. The CEO and VP live in different states, for one, and they had tons of raw product unpackaged. IMO, they work a hell of a lot harder at having a weekly press release than actually moving their product, or landing private labeling deals. Also, they only sell huge quantities, like for oil tankers, so I can't make sales to oil change stations. I personally think they'd be better making a food product, but I'm biased because I eat hemp about every day.
UPSIDE is that they have a giant plant, so even if they suck at moving their own product, they may end up being the only show in town if hemp blows up as a crop.

GrowLife sells farming equipment, and took some shares off the market last year instead of releasing more, and had increased sales, but still big losses.


Those are my 3 largest holdings. Others like Medical Marijuana, Inc., GreenGro, Cannabis Solutions, and Global Payout Inc (trying to be a pot PayPal) I own between $100-$500 worth.

I have seen pot stocks go from pennies to dollars, but none that I was in.

I can read a balance sheet, and that is why I know I'm gambling. It began with small amounts going in each month, and has added up to more than I thought I'd have put in on my own.

[Sciurus]

Hemp, Inc. has a HazMat cleanup product, and they run farming seminars. HUGE CONCERN: I reached out to them last year about selling their product, and while they were so great in talking to me, they ended up including me on some inside emails that made me see that it's not well-run. The CEO and VP live in different states, for one, and they had tons of raw product unpackaged. IMO, they work a hell of a lot harder at having a weekly press release than actually moving their product, or landing private labeling deals. Also, they only sell huge quantities, like for oil tankers, so I can't make sales to oil change stations. I personally think they'd be better making a food product, but I'm biased because I eat hemp about every day.
UPSIDE is that they have a giant plant, so even if they suck at moving their own product, they may end up being the only show in town if hemp blows up as a crop.

Thanks. I appreciate your candor and willingness to share.  This Hemp company is intriguing, I like that you reached out to them and were able to glean some insight that you wouldn't get from just reading press releases.  It sounds like a change in leadership in the company could be the catalyst to turn it around. A change is not a guarantee for success but from your description I wouldn't have confidence that the current management team has what it takes.

The best advice I can give is to not hold companies that you have become disillusioned with.  It's not a good idea to hang on and hope that you recoup your sunk cost/losses.  Probably better to look at it objectively and move your money to something you feel positive about.  Saul's investing discussion from KBecks post also covers this in his Knowledge base section along with his investing philosophy which is better articulated than anything I could write.

[A Fella from Stella]

Hemp, Inc. has a HazMat cleanup product, and they run farming seminars. HUGE CONCERN: I reached out to them last year about selling their product, and while they were so great in talking to me, they ended up including me on some inside emails that made me see that it's not well-run. The CEO and VP live in different states, for one, and they had tons of raw product unpackaged. IMO, they work a hell of a lot harder at having a weekly press release than actually moving their product, or landing private labeling deals. Also, they only sell huge quantities, like for oil tankers, so I can't make sales to oil change stations. I personally think they'd be better making a food product, but I'm biased because I eat hemp about every day.
UPSIDE is that they have a giant plant, so even if they suck at moving their own product, they may end up being the only show in town if hemp blows up as a crop.

Thanks. I appreciate your candor and willingness to share.  This Hemp company is intriguing, I like that you reached out to them and were able to glean some insight that you wouldn't get from just reading press releases.  It sounds like a change in leadership in the company could be the catalyst to turn it around. A change is not a guarantee for success but from your description I wouldn't have confidence that the current management team has what it takes.

The best advice I can give is to not hold companies that you have become disillusioned with.  It's not a good idea to hang on and hope that you recoup your sunk cost/losses.  Probably better to look at it objectively and move your money to something you feel positive about.  Saul's investing discussion from KBecks post also covers this in his Knowledge base section along with his investing philosophy which is better articulated than anything I could write.

This is solid advice. I actually cut my holdings by about 90% (from about 1MM shares to 100k) after finding out what I found, taking a small profit, but not actually taking it because it stayed in stock.

[KBecks]

If I were you (and I'm not, and you shouldn't listen to people on the internet without doing your own thinking), I would take the money out of the pot stocks.

Then I would look for larger, more proven companies to invest in.

Dollar cost averaging is great, but do it in an index or in something very solid.  Maybe a Home Depot, Mastercard, etc.

You will want a portfolio of at least 10 stocks as your foundation if you are a single stock investor. 

I also listen to a lot of Cramer, and he's not bad.  He says to put your first 10k in index funds (if I recall correctly).

Your dollar cost averaging is very good, just pick more stable companies or the S&P 500 index, while you are learning and re-evaluating.  In fact, that would probably be step 1 that I would recommend for you.  Sell some pot stocks, open an S&P 500 fund, I like Vanguard, and redirect your monthly contributions into the S&P 500 fund.  So at least your new money is better positioned.

You might want to also look into DRIP investing, which is in solid dividend paying companies.

Now, maybe you want to take a % to play around with -- but seriously, I'd look at the stocks at Saul's message board (link above) and not pot stocks.

You have to know that if you have a gambling personality, you have to put in some rules so you don't burn yourself with impatience.  Say, I will hold company X - three years, or hey -- 12 months -- so you don't get bit by short term capital gains taxes.

I happen to like Warren Buffet's rule #1 -- don't lose money.  Investing in single stocks is NOT easy.  Most people lose.

[A Fella from Stella]

If I were you ..........................Say, I will hold company X - three years, or hey -- 12 months -- so you don't get bit by short term capital gains taxes.

I happen to like Warren Buffet's rule #1 -- don't lose money.  Investing in single stocks is NOT easy.  Most people lose.

Thanks so much for chiming in. I have begun to stop putting money into them and bought some shares of Ford, and am looking into others, like Under Armour and Hershey's.

Initially, I just thought I'd turn hundreds of dollars into thousands as this thing happened. Then I ended up with thousands in it, and have millions of combined shares, which was not my intention, but as other marijuana companies (Aphria, Canopy, Aurora) hit in a big way I thought maybe I was getting lucky with the timing, and my riches were around the corner.

Also, having read Scott Adams' "How to Fail", book, I look at this as one thing among many that I'm trying.

But it might be time to reduce the holdings and stop thinking about it.