99 Marijuana Stocks For Your Do Not 'Buy And Hold' List

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Includes: ACGX, AERO, AGTK, AMMJ, ATTBF, AVTCQ, BAYP, BLPG, BNRDF, BRDT, BTFL, CANL, CANN, CARA, CBDS, CBGI, CBIS, CGRW, CHUM, CIIX, CNAB, CNBX, CVSI, DEWM, DSCR, EAPH, ECIGQ, EDXC, ENDO, ENRT, ERBB, FITX, FSPM, FWDG, GBLX, GECC, GLAG, GRCU, GRCV, GRNH, GTSO, GWPH, GWPRF, HEMP, HMKTF, ICBU, ICN, MDTR, PKPH, PRRE
by: Anthony Cataldo
Summary

Barring significant, earlier event dates, my entry period into the marijuana sector is August 2016, preceding November 2016 ballot measures likely for decriminalization in large states.

Fundamental measures are likely to be irrelevant for an anticipated upside early November over-reaction, but “tooling up” for a portfolio approach for entry or “buys” takes time.

In the interim, day-trades for specific firms in the sector could prove profitable, but great caution must be exercised when “trading on news” for these cash-strapped firms.

“Luck” equals “preparation” plus “opportunity;” this is the “preparation” phase…in the interim I recommend that you focus on real stocks, real firms, and real sectors of the economy.

As promised, a broad brushstroke checklist for you to consider is included in this installment; it will probably take less time than reading a stock promotion email.

My focus remains, primarily, on those firms accessing U.S. capital markets. More firms will enter the marijuana sector or segment of the economy between now and November 2016 ballots measures for legalized marijuana use in additional U.S. states. I recommend avoiding anything other than a day-trade for the marijuana segment or sector in the near-term.

Three stocks have been added to the prior list of N=96, bringing the total to N=99. I have moved the list and table to the end of the article, as an appendix, as I have seen another SA article that did something similar. The new additions follow:

  • Cannabis-Rx, Inc. (CANA), a Delaware corporation, has been added to the list. This firm has a positive working capital position. Positive cash flows are being generated from financing activities. The below footnote, from the financials, came from the "related parties" section:

I don't know how you feel about paying cash for a firm's stock and their use of this cash to make interest-free loans to related parties. Unsecured debt usually carries rates of interest comparable to those for credit cards.

The 1 year chart follows:

  • Grand Capital Ventures, Inc. (OTCPK:GRCV) has been added to the list. This firm has a negative working capital position. Below is a portion of the firm's balance sheet:

Note the odd format, where the firm used pennies. Also note no separate classification for current and noncurrent assets. Accountants are taught to avoid the use of pennies, as they are insignificant, immaterial, a distraction, and, therefore, generate "noise." Look at financials for any big cap firm, as filed with the Securities and Exchange Commission, and you will notice they round to thousands or millions of dollars to avoid this distraction, so it is all relative.

The statement of cash flows was prepared by someone who does not how to prepare a statement of cash flows, and is in a format unlike any I have ever seen for any publicly traded firm or otherwise. There are no footnotes to the financial statements, at all. If forced to guess, I would have to say these financials were prepared by someone having completed a single introductory financial accounting course, perhaps at the bookkeeping or freshman/sophomore level, where the text or instructor skipped the chapter on the statement of cash flows.

The 1 year chart follows:

  • Zoned Properties, Inc. (OTCQX:ZDPY), a Nevada corporation, has been added to the list. This firm has a negative working capital position. Below is a portion of the firm's balance sheet:

Note the odd format. This balance sheet (1) does not list assets in order of liquidity and (2) assets are not classified as current or non-current. It always concerns me when I see these atypical formats. Accountants are trained to do things very differently, at the introductory level. You can look at any big cap firm's financials filed with the Securities and Exchange Commission on their website and you will come to understand the significance of this observation. A similar observation was made for the liabilities section of the firm's balance sheet (not shown).

An enormous amount of cash flow is being generated from financing activities:

The firm did a reverse-split in 2014:

This firm has some convertibles and related party transactions and you should read the footnotes to the financial statements before investing in this firm.

The 1 year chart follows:

The Checklist or Approach I Recommend Using

Day-trading is a separate topic, but the below checklist, while not confined to the marijuana sector, might prove helpful, particularly when consider a long-term "buy-and-hold" for a penny stock. I have attempted to keep the list as simple and short as possible.

The tasks I recommend may seem over-whelming, but you might be surprised that, with a bit of practice, you can scan a firm's financials for these topics in 5-10 minutes. It will take you less time to go through this checklist that it will to read a stock chat message board for sentiment or a spammed email you received from a stock promoter. Of course, working through the actual detailed mechanics and providing a forecast or cash flow projection for the below could take hours (or days), but your objective should be to scan for possible "red flags" or warning signs, and walk away from those stocks presenting strong evidence of dilution or shareholder value destruction.

  1. Look at the balance sheet. Is working capital positive? If yes, no immediate insolvency issues are on the horizon. If no, check the statement of cash flows. How are they going to avoid "bouncing a check" in the next 12 months? One way, of course, is through the sale of additional shares, directly or indirectly, known, also, as "dilution." Most shareholders do not like to have their ownership interest diluted.
  2. Look at the statement of cash flows. Are positive cash flows being generated from operations? If yes, this stock may be a buy. If no, check the balance sheet for (1) related party receivables or payables, (2) convertible debt, and (3) a complex capital structure where warrants or preferred stocks are being offered, in addition to the common stock, of which there can only be one class (e.g., if more than one class of common stock, determine which class, if any, represents the voting shares).
  3. Read the footnotes for "related party" transactions. Related party transactions and arms-length transactions are mutually exclusive. Related party transactions must be carefully scrutinized. The simple question to ask is whether or not you feel that investing your money in a firm engaging in these deals gives you cause for concern that, as a shareholder, you might not participate in any stock price appreciation. Interest-free loans represent an example. If the firm is providing an interest-free loan to a related-party, do you feel comfortable financing this interest-free loan for someone? If yes, this stock may be a buy. If no, walk away from it.
  4. Read the footnotes for convertible debt, stock warrants or preferred stock issues with favorable conversation features or interest rates. Frequently, these deals involve related parties. Again, related party transactions and arms-length transactions are mutually exclusive. Also, again, they must be carefully scrutinized. And, finally, and again, the simple question to ask is whether or not you feel that investing your money in a firm engaging in these deals gives you cause for concern that you, as a shareholder, might not participate in any stock price appreciation. Examples might include (1) convertible debt that pays 12% interest, in a world where you can only earn 1% at your bank and/or (2) preferred stock or warrants or option to convert debt to common stock at a favorable price (e.g., 40% of the bid for the prior 10 days before exercise or 10% of its current trading price per share). If the stock price rises, despite these "toxic convertibles" or "death spiral" financing, you might say yes and decide to buy and hold the stock. As long as shareholder value is being created, you should not be immediately concerned. If you are concerned, walk away from it.

The Securities and Exchange Commission Warnings about Stock Promotions

While the Securities and Exchange Commission continues to warn investors about stock promotions, it might be helpful to understand how some of these microcap and microcap marijuana firms enter the marijuana sector.

In broad terms, subject to variation, they buy a corporate shell for $250-$300K and reverse merge an entity into it. Attorneys and auditors will charge them about $100K per year to maintain the entity and filings. So, let's say nearly $400K just to get started and trade for the first year.

If you do not have the $400K, but have a business plan, an angel investor or venture capitalist will probably get involved for, say, 40% of the firm (watch the series, Shark Tank, to get a feel for some negotiations). They take this percentage in the form of "toxics" or "death spiral" financing, since they are terribly interested in capital preservation. They want their money, plus a generous return, so the stock promoter enters the picture at, say, $100K. Now, we are up to about $½ million, and this is at no return other than the hope of capital investment recovery. In many cases, there are no operations, there is no value, and there may never be any value to shareholders.

Summary

Stay focused on (1) liquidity and (2) shareholder dilution when targeting a marijuana stock for your long-term buy-and-hold portfolio. Day-trading is a separate issue, but many do not fare well when buying from emailed stock promotions. The Securities and Exchange Commission has warned about these stock promotions. There are, of course, exceptions to these generalizations.

Please continue to post additional tickers in the comments section.

Appendix: The List of N=99 Marijuana Stocks

You can copy/paste the below table and print it out and use it to formulate your own opinions on all N=99 marijuana stocks. The list, where measures were recorded in late January 2015, is only your starting point. You must update it, make your own notes, and decide whether the firm looks good for a long-term buy-and-hold:

Name

Ticker

NV

DE

CAN

CR

PR

Alliance Creative Group, Inc.

(OTCPK:ACGX)

1

0

0

2.42

138

Acology, Inc.

(OTCQB:ACOL)

0

0

0

0.27

22

Aerogrow International, Inc.

(OTCQB:AERO)

1

0

0

0.92

67

Agritek Holdings, Inc.

(OTCQB:AGTK)

0

1

0

0.75

0

American Cannabis Company, Inc.

(OTCQB:AMMJ)

0

1

0

1.08

0

Abattis Bioceuticals Corp.

(OTCQX:ATTBF)

0

0

1

4.82

5

AVT, Inc.

(OTCPK:AVTC)

1

0

0

1.03

19

Bayport International Holdings, Inc.

(OTCPK:BAYPD)

1

0

0

0.07

13

Blue Line Protection Group, Inc.

(OTCQB:BLPG)

1

0

0

0.35

0

Bedrocan Cannabis Corp.

(OTC:BNRDF)

0

0

1

8.10

0

BreedIT Corp.

(OTCQB:BRDT)

0

1

0

7.50

13

Monarch America, Inc.

(OTCQB:BTFL)

1

0

0

0.36

0

Cannabis-Rx, Inc.

(OTCQB:CANA)

0

1

0

3.09

46

CannLabs, Inc.

(OTCQB:CANL)

1

0

0

0.27

0

Advanced Cannabis Solutions, Inc.

(OTC:CANN)

0

0

0

1.08

14

CannaVest Corp.

(OTCQB:CANV)

0

1

0

40.98

3

Cara Therapeutics, Inc.

(NASDAQ:CARA)

0

1

0

9.75

0

Cannabis Sativa, Inc.

(OTCQB:CBDS)

1

0

0

0.04

0

Cannabusiness Group, Inc.

(OTC:CBGI)

1

0

0

0.08

13

Cannabis Science, Inc.

(OTCQB:CBIS)

1

0

0

0.19

377

Cannagrow Holdings, Inc.

(OTCPK:CGRW)

0

1

0

0.10

0

Chuma Holdings, Inc.

(OTCQB:CHUM)

1

0

0

0.13

0

Chineseinvestors.com, Inc.

(OTCQB:CIIX)

0

0

0

0.91

17

United Cannabis Corporation

(OTCQB:CNAB)

0

0

0

0.69

17

Cannabics Pharmaceuticals, Inc.

(OTCQB:CNBX)

1

0

0

1.07

1

Peak Pharmaceuticals, Inc.

(OTCPK:CTCO)

1

0

0

8.42

1

Dewmar International BMC, Inc.

(OTCPK:DEWM)

1

0

0

0.07

64

Discovery Minerals, Ltd.

(OTCPK:DSCR)

1

0

0

0.00

38

Easton Pharmaceuticals, Inc.

(OTCPK:EAPH)

0

0

0

0.49

124

Electronic Cigarettes International Group, Ltd.

(OTCQB:ECIG)

1

0

0

0.42

6

ENDEXX Corp.

(OTCPK:EDXC)

1

0

0

0.32

172

Endocan Corp.

(OTCPK:ENDO)

1

0

0

0.00

31

Enertopia Corp.

(OTCQB:ENRT)

1

0

0

1.87

50

American Green, Inc.

(OTCPK:ERBB)

1

0

0

0.01

323

Creative Edge Nutrition, Inc.

(OTCPK:FITX)

1

0

0

0.70

300

Fusion Pharm, Inc.

(OTC:FSPM)

1

0

0

0.73

13

Full Circle Capital Corp.

(FULL)

0

0

0

7.34

0

FutureWorld Corp.

(OTCPK:FWDG)

0

1

0

0.24

26

Growblox Sciences, Inc.

(OTCQB:GBLX)

0

1

0

44.17

23

Gala Global, Inc.

(OTCQB:GLAGD)

1

0

0

0.00

0

Green Cures & Botanical Distribution, Inc.

(OTCPK:GRCU)

0

0

0

4.85

5

Grand Capital Ventures, Inc.

(OTCPK:GRCV)

0

0

0

0.13

0

GreenGro Technologies, Inc.

(OTCPK:GRNH)

1

0

0

2.70

25

Green Tech Solutions

(OTCQB:GTSOD)

0

1

0

0.02

11

GW Pharmaceuticals, PLC

(NASDAQ:GWPH)

0

0

0

10.18

54

GW Pharmaceuticals, PLC

(OTCPK:GWPRF)

0

0

0

10.25

0

Hemp, Inc.

(OTCPK:HEMP)

0

0

0

1.77

116

Highmark Marketing, Inc.

(OTCPK:HMKTF)

0

0

1

7.00

0

IMD Companies, Inc.

(OTCPK:ICBU)

0

0

0

0.23

148

Icon Media Holdings, Inc.

USST/(OTCPK:ICNM)

1

0

0

0.67

43

IJJ Corp.

(OTCPK:IJJP)

1

0

0

30.90

15

InMed Pharmaceuticals, Inc.

(OTCQB:IMLFF)

0

0

1

0.78

0

Indoor Harvest Corp.

(OTCPK:INQD)

0

0

0

15.07

0

INSYS Therapeutics, Inc.

(INSY)

0

1

0

2.98

0

Latteno Food Corp.

(OTCPK:LATF)

0

1

0

0.03

61

Cannabiz Mobile, Inc.

(OTCPK:LGBI)

1

0

0

0.16

33

Livewire Ergogenics, Inc.

(OTCPK:LVVV)

1

0

0

0.52

186

Lexaria Corp.

(OTCQB:LXRP)

1

0

0

2.79

83

Medbook World, Inc.

(OTCPK:MBOO)

1

0

0

0.02

0

mCig, Inc.

(OTCQB:MCIG)

1

0

0

0.45

17

Medbox, Inc.

(OTCQB:MDBX)

1

0

0

0.90

18

Medican Enterprises, Inc.

(OTCQB:MDCN)

1

0

0

0.35

9

Medical Marijuana, Inc.

(OTCPK:MJNA)

0

0

0

13.46

375

Mentor Capital, Inc.

(OTCPK:MNTR)

0

0

0

12.57

1

Maple Leaf Green World, Inc.

(OTC:MPEFF)

0

0

1

0.54

0

MyECheck, Inc.

(OTCPK:MYEC)

0

0

0

0.20

169

GrowPros Cannabis Ventures, Inc.

(OTC:MZRRF)

0

0

1

0.37

0

Novus Acquisition & Development Corp.

(OTCPK:NDEV)

1

0

0

6.27

158

Nemus Bioscience, Inc.

(OTCQB:NMUS)

1

0

0

3.16

0

Neutra Corp.

(OTCQB:NTRR)

0

0

0

0.02

19

OrganiGram Holdings, Inc.

(OTCQB:OGRMF)

0

0

1

3.56

0

OSL Holdings, Inc.

(OTCQB:OSLH)

1

0

0

0.14

110

OXIS International, Inc.

(OTCQB:OXIS)

0

1

0

0.06

33

Growlife, Inc.

(OTC:PHOT)

0

1

0

0.17

156

Plandaí Biotechnology, Inc.

(OTCQB:PLPL)

1

0

0

5.98

772

PharmaCyte Biotech, Inc.

NVLX/(OTCQB:PMCB)

1

0

0

4.62

734

Primco Management, Inc.

(OTCPK:PMCM)

0

1

0

0.04

131

Petrotech Oil and Gas, Inc.

(OTC:PTOG)

1

0

0

0.00

221

Pazoo, Inc.

(OTCQB:PZOO)

1

0

0

0.22

454

Quasar Aerospace Industries, Inc.

(OTCPK:QASP)

0

0

0

0.76

105

Medical Cannabis Payment Solutions

(OTCPK:REFG)

1

0

0

2.99

266

Rapid Fire Marketing, Inc.

(OTCPK:RFMK)

1

0

0

0.64

95

Affinor Growers, Inc.

(OTCQB:RSSFF)

0

0

1

13.19

0

SinglePoint, Inc.

(OTCPK:SING)

1

0

0

0.09

69

Supreme Pharmaceuticals, Inc.

(OTCPK:SPRWF)

0

0

1

7.43

3

Surna, Inc.

(OTCQB:SRNA)

1

0

0

0.88

14

Stevia Corp.

(OTCQB:STEV)

1

0

0

4.36

111

Tauriga Sciences, Inc.

(OTCQB:TAUG)

0

0

0

0.38

39

Totally Hemp Crazy, Inc.

(OTCPK:THCZ)

1

0

0

0.06

8

Therapix Biosciences, Ltd.

(OTCQB:THXBY)

0

0

0

0.50

0

Terra Tech Corp.

(OTCQB:TRTC)

1

0

0

0.42

288

Two Rivers Water & Farming Company

(OTCQB:TURV)

0

0

0

1.17

1

Tweed Marijuana, Inc.

(OTC:TWMJF)

0

0

1

5.58

0

Indie Growers Association, Inc.

VKML/(OTCQB:UPOT)

1

0

0

0.40

38

U.S. Energy Initiatives Corporation, Inc.

(OTCPK:USEI)

1

0

0

1.26

226

Vape Holdings, Inc.

(OTCQB:VAPE)

0

1

0

0.94

1

Vaporin, Inc.

(OTCQB:VAPO)

0

1

0

3.47

10

Vapor Group, Inc.

(OTCPK:VPOR)

0

0

0

0.85

80

Zoned Properties, Inc.

(OTCPK:ZDPY)

1

0

0

0.71

1

Totals

50

17

10

517.46

Mean

5.23

75

NV = Nevada corporations. DE = Delaware corporations.

CAN = Canadian corporations. CR = Current ratio.

PR = Number of stock promotions.

Additional Disclosure: I have not and will not invest any money in any of these stocks, at this point in time. I never have and do not short penny stocks.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.