Should you invest in cannabis penny stocks? It's an age-old question and one you should only answer after plenty of research. But say you go ahead and decide you want to take the risk, then there is no better time to buy than during a lull.
And it just so happens that the entire cannabis sector is currently in one. Yes, since the end of April, cannabis stocks everywhere have battled a downward trend. This has left a host of cannabis stocks exposed, with some of the smaller-priced shares, in particular, offering an optimum buy-in opportunity.
So let's check out some of these cannabis penny stocks. Who is offering investors a good dilemma?
What is a Penny Stock?
The general rule of thumb is that penny stocks pertain to any share valued at $5 or less. Companies offering shares at these low prices are usually small-capped companies. Therefore, they are likely to be newer companies, less experienced, and at the earlier stage of the business life-cycle.
It doesn't take a genius to understand that this may incur risk.
Cannabis Penny Stocks to Watch: CannTrust Holdings (TSX:TRST) (NYSE:CTST)
In the last three months, the cannabis sector has "bottomed-out." In other words, the entire index has declined; shedding a worrisome 27%. There were multiple factors for the decline, but what investors need to know now is what to do in the midst of this lull. As stated, cannabis penny stocks are often ripe for the picking when a bearish trend has taken hold.
All eyes have been on cannabis company CannTrust Holdings lately. The company is at the center of a controversy that wiped over 50% off its stock value. In short, the company was found to have cultivated marijuana without a license at one of its facilities, and it consequently failed its Health Canada audit. In response, CannTrust ceased its production of cannabis until the matter is sorted, delaying future output and sales.
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Though on a low ebb, a savvy investor might spy an opportunity here. When this controversy passes, and when the company restarts production, there is every chance that this cannabis penny stock will surge.
In fact, shares already spiked 19% this week on news that has given the entire sector a much-needed boost. The US Food and Drug Administration (FDA) decided to speed up its regulatory process with regards to CBD.
Interestingly, despite CannTrust's current issues, shares managed to react significantly to the wider sector news. This indicates that CannTrust stock is not immune to a resurgence even though operations are stifled right now. However, some experts believe this may be the end for CannTrust, so, both sides of the argument should be considered before making any moves.
Cannabis Penny Stocks to Watch: Aleafia Health (TSX:ALEF) (OTCQX:ALEAF)
Another cannabis penny stock to watch during this lull is Aleafia Health. After hitting a low of $0.74 USD on June 25, these shares have begun a rebound of sorts, but there is potential for further growth.
These shares woke up again after the company secured a license from Health Canada. According to the press release the license authorizes "cannabis cultivation for the entirety of the Company’s Port Perry Outdoor Grow facility. The Licence immediately increases the Company’s licensed and operational outdoor cultivation area from 292,000 sq. ft. to over 1.1 million sq. ft."
With its cultivation area now tripled in size, Aleafia is in line for a much greater annual production capacity. The benefits that this affords Aleafia make its share a very interesting play right now.
Looking back to earlier 2019, at its highest high, Aleafia stock commanded $2.10 USD per share. Its current price of $0.88 USD, by comparison, is only 42% of its highest value. There is great potential for Aleafia to upswing again, and especially with the increase in production capacity this new license now affords the company.
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Cannabis Penny Stocks to Watch: Sunniva (CSE:SNN) (OTCQB:SNNVF)
Shares of Sunniva Inc are currently selling for $2.35 CAD on the CSE. Like its aforementioned peers, Sunniva has declined considerably in recent weeks but now, offers prime buy-in potential.
Though a Canadian company at first, Sunniva has sold off all of its Canadian assets to focus its operations entirely on the Californian market. It was a risky move to make, though some believe it shrewd considering how saturated the Canadian market now is.
Sunniva's goal is to become a premier cannabis producer in the Golden State, and it just might do it. It is currently constructing a cannabis production campus in Cathedral City, California. When finished, the campus will include a growing facility and a retail store.
At the end of April, this cannabis penny stock was double its current value. Selling for $5.23 approximately, shares have lost about 55%. However, as SeekingAlpha puts it: "[Sunniva stock's] depressed valuation relative to peers makes them an attractive buy."
Aiming for the California market is a lucrative play. Most recent estimations suggest this market will reach $5.1 billion by 2020. Even being a small-cap company in this sized market means a lot of room for profits.
What cannabis penny stocks are on your radar? Let us know!
Featured Image: DepositPhotos © ginasanders
