Marijuana stocks whipsawed on both sides of the border on Tuesday, with many extending days of losses as investors continued to pan signs of strong demand in newly-legal Canadian recreational markets.
Opening bells in Toronto and New York were followed by double-digit declines for several of the industry’s biggest names. Tilray Inc. (TLRY) plunged 16 per cent before paring much of its losses. Canopy Growth Corp. (WEED.TO) fell as much as 12 per cent before showing signs of recovery.
The Horizons Marijuana Life Sciences Index (HMMJ.TO) exchange-traded fund dropped as much as 11 per cent in early trading before cresting towards positive territory.
Craig Wiggins is a member of the increasingly popular trio of independent marijuana analysts known as “TheCannalysts.” He said the volatility speaks to the number of rookie retail investors that piled into pot stocks ahead of recreational legalization in Canada.
“Once the sheep start running the sheep keep running,” he told Yahoo Canada Finance on Tuesday. “The news seems to whip first-time investors into the market. I don’t think they have the stomach for it. Once it starts dropping, they’re like, ‘Oh my God. I should sell.’”
TheCannalysts emerged for a popular pot forum on the social networking website Reddit.
Wiggins boasts three decades of experience in commercial lending, and runs a supply chain financing company. Veteran commodity trader Andrew Udell and Brock University biotechnology PhD candidate Graham Jones round out the other two-thirds of the group.
Wiggins said new investors buying marijuana company shares without stop-loss orders to shield them could explain in part why sell-offs have tended to lag days behind material news in the sector.
Wiggins is calling for “carnage in this industry” as it matures and consolidates into a handful of dominant players.
That said, he remains positive on pot over the long-term. He owns shares of Aphria Inc. (APH.TO), Liberty Health Sciences Inc. (LHS.CN), CannTrust Holdings Inc. (TRST.TO), and Origin House (OH.CN), formally CannaRoyalty Corp. (CRZ.CN).
“This is like riding the cannabis bronco. You got to get used to being thrown every once in a while,” Wiggins said. “Don’t just abandon the plan because the market has changed and none of the fundamentals have.”