Editor's Note: This article is meant to introduce The Growth Operation, Jonathan Cooper's Marketplace service.
This month, I launched my exclusive research service, The Growth Operation. The goal of this service is to find the best investments in the growing cannabis sector - potentially worth >$200 billion by 2032 - as well as in technology and other growth sectors.
My Investment Philosophy
I seek securities that have great growth prospects in emerging industries with potential for significant gains in the future. My investment timelines are often quite long, with timelines of at least 6-12 months, and often spanning years. I am primarily a buy-and-hold investor and believe that selling is only appropriate when prices have run out ahead of themselves or the underlying narrative of a company has changed.
My valuation methods are typically based on discounted cash flows and value-based metrics, rather than based on any form of technical analysis. I prefer not to use relative valuations, although in an emerging market like cannabis, it can be necessary at times. But even then, it is important to recognize the weaknesses of that approach.
If you're "sure" about anything in the stock market, as it relates to the future, you aren't thinking about it enough. Every trade has two sides and every stock has multiple competing narratives.
One should be as objective as possible about all investments and be able to succinctly and convincingly state both the bull and the bear cases for anything they invest in. You invest based on a belief that one is stronger than the other, but you should absolutely be able to recite both sides.
If you can't, you're just investing with emotion. Might as well go bet on black at $LVS.
So no, I'm not sure. And I should never be sure. Being sure is being complacent. And if you're complacent, just stop.
For further information on my investment philosophy, I would encourage readers to read my August 2018 Portfolio Update, which details my portfolio and the rationale behind all of my holdings.
A Few of My Favorite Articles
Rather than tell you how I invest or how I write, it is most instructive to read a few of my articles which include - in my view - my most representative analysis and a good indication for my current writing and analysis style.
American Cannabis: A Potential $90+ Billion Market (August 23, 2018): An analysis of the potential size of an American cannabis market if/when cannabis is legalized. The eventual estimate is based on Washington state sales figure projections, after concluding that Colorado figures are likely to skew high. The estimate is quite rough, and perhaps the best aspect here is the listing of factors that could significantly alter this estimate.
Roku: Riding The Wave Of The OTT Revolution (August 5, 2018): My most recent thesis on Roku (ROKU), which continues to be an investment I really like. Roku benefits from a growing market - over-the-top streaming - and boasts tremendous growth on both revenue per user and user numbers. Roku will continue to benefit as it grows the number of television makers including the Roku platform as their TV streaming operating system and as Roku continues to monetize and expand the Roku Channel. I continue to own ROKU shares.
Facebook Is A Bargain: Target Price Of $240/Share (July 30, 2018): This thesis hasn't yet played out, but it is a good example of my investment approach. I look at the drivers of Facebook's (NASDAQ:FB) growth - ARPU gains and increasing users - and do a detailed discounted cash flow to estimate the value of Facebook. Since this was posted, shares have lost ~3%, but the thesis here is long-term and is, in my opinion, still in tact. I continue to own FB shares.
What you get with The Growth Operation
When you subscribe to The Growth Operation, you receive:
- Exclusive first access to weekly ideas and in-depth analysis of rising cannabis and growth companies. Recent postings include coverage of Hexo (OTCPK:HYYDF), Canntrust (OTC:CNTTF), and Emerald Health (OTCQX:EMHTF).
- Frequent coverage of cannabis industry news and happenings, and my take on what that news means for investors.
- Exclusive access to my cannabis company database and spreadsheet, detailing supply agreements, production capabilities, and impacts from dilution through warrants and options, all with links to original source materials for that data. This enables comparisons between companies on their EV/production and EV/supply agreement basis.
- Exclusive access to my live portfolio and updates whenever I buy or sell based on my research.
Best & Worst Picks
|First Publication||Rec.||Performance||Example Article|
|2018-02-13||Buy||C$3.85 to C$7.75 (+102%)||Hydropothecary: 55% Upside On Quebec Cannabis Play (March 29, 2018)|
|More recent coverage of Hexo is available on The Growth Operation, but the basic thesis here is that Hexo is very cheap compared to its peers on both an EV/production basis and an EV/supply agreement basis. Hexo's agreements with Quebec are only 20,000 kg in the first year, but Quebec likely under-ordered (see my articles in February and on September 7) and Hexo's agreements average ~40,000 kg/year over five years. Further, Hexo has a joint venture with Molson Coors (TAP) that is likely to be lucrative, as well as supply agreements in Ontario and British Columbia. They continue to be a bargain for their price, even after 100% gains.|
|2017-11-17||Buy||$39.79 to $68.51 (+72%)||Roku: Riding The Wave Of The OTT Revolution (August 5, 2018)|
|2017-10-16||Sell||$7.54 to $2.10 (-72%)||AXIM Biotechnologies' Recent Patent Does Not Offer Value To Investors (October 16, 2017)|
|A rare short piece (I've only published three) explaining that a then-recent +25% price jump on AXIM was unwarranted and that shares would be likely to fall in the future.|
|2017-12-14||Sell||$2.78 to $1.14 (-59%)||Workhorse: Upcoming Dilution May Hurt Investors (December 14, 2017)|
|Another rare short piece, this time based on the idea that Workhorse had a lot of ideas (which I was skeptical would work), but they were also bleeding cash and would need to raise money soon. I further showed that when Workhorse raised money, it was often at disadvantageous terms and that shareholders ultimately lost value. That thesis ultimately played out through 2018.|
To not paint an inaccurate picture, not everything I have said has been a success. My three worst calls, in percentage, have been:
Square: Time To Sell This Overvalued Company (2017-11-29): This was the wrong call at the wrong time. Square (SQ) has continued to perform well since this piece. Shares have moved from $42.55 to $89.27 since then - up 110%. Today, I rarely make short calls - my most recent was the December 2017 article on Workhorse noted above.
Delta 9: Growing Cannabis In Shipping Containers (2018-02-01): An early misstep in my coverage of cannabis companies. This piece underestimated the importance of strong management in a growing market. Shares have fallen from C$2.76 to C$1.89 since then - a loss of 32%. (I purchased, and still own, a small stake in Delta 9 (OTCQX:VRNDF) (NINE.V).)
High Liner Foods: Finding Value In Fish Sticks (2018-03-06): A misstep in the packaged goods industry. I was looking for stable Canadian dividend stocks, similar to my more recent article on Corby Spirit and Wine, but High Liner Foods has not performed well since then. After dividends, I am down 26% on my holding of TSE:HLF, with prices falling from a (dividend-adjusted) C$10.56 to C$7.80.
Thank you to all who have read my articles, followed me on Seeking Alpha, and commented in the comments - positive or negative. I look forward to posting more coverage on growing industries - like cannabis - in the future, both on Seeking Alpha and to The Growth Operation community.
Interested in the Growth Operation? Go here to get started and be one of our founding members! I am offering an early bird rate of $30 month or $240 year - 25% savings on our standard rate. Only available to the first subscribers. Sign up for your two-week free trial here.
Disclosure: I am/we are long FB, HEXO.TO, ROKU, TRST, TSLA, NINE.V. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.