Yellow Brick Road, Marijuana Stocks, SPLI, and What A Little Research Can Show

For many investors, the marijuana stocks sector has been like the yellow brick road in the Wizard of Oz. A hopeful journey along golden brick path towards an emerald city and then dark skies, freaky flying monkeys and oh Sh*t – a witch. “Follow, follow, follow follow, the yellow brick road.” No, thanks. I took my cash and stepped aside. Just in time before the dark forces swooped down took my hard earned money. It has been an ugly April so far.

Unfortunately, and I admit, this wasn’t the first time I was walking the yellow brick road and was confronted by a darkness. Not only was I walking on this shiny gold brick road but I was drinking kool aid too. A big no-no. Several years ago, in the bullish video game sector, I placed a bet on a pink sheet penny stock.

This company was led by a CEO who had tons of experience working for one of the biggest video game players. They released several “promising” video games for all the major console brands. The CEO was very “transparent” and updated shareholders on a regular basis with not only press releases but video conference calls! You think Bill Chaaban is “the man” keeping the FITX shareholders up to date? Now, imagine if Chaaban also spoke to the shareholders by video…

Long story short, the stock tanked, the CEO sold all of his shares, sold the company, and the stock has remained around .0001 for the last umpteen months even though the video game sector is still plugging away.

It has been a short and interesting ride with the marijuana penny stocks. We have seen some these cannabis companies come from nowhere and some of them rising from the ashes of failed companies in another sector, only to hit record highs in a very short period of time. And we have see some of these cannabis stocks tank in share price in a very short period of time. We have seen major media coverage of these stocks, only to have one of the bigger names cut off coverage completely. And we have seen the trading halted of 2 of the most popular weed stocks in the sector.

So, what do we make of the marijuana stocks and this “all too new” sector? One of the biggest gurus of penny stock trading, Timothy Sykes, who turned just over $10,000 into 3 million plus, says that some of these companies are junk and should only be traded.

Traders who refuse to cut losses on junk like $SPLI $MINE $FRTD are not traders, they’re newbies, those who listen to newbies DESERVE losses

— Timothy Sykes (@timothysykes) April 7, 2014

On the other hand, if you are Wolf of Weed Street, the mostly anonymous leader of the #wolfpack sensation on Twitter – who’s moniker is taken from the movie of almost the same name – believes there are a handful of marijuana companies which are worth investing in for the long term.

Which brings us to SPLI which is one of the #wolfpacks picks and a stock I was holding long until late last week. It’s easy to follow as it is easy to follow a road made of sparkly golden bricks or an anonymous character on twitter who tells you what to do. Sadly, it seems, many so called investors are following every tweet wolf makes without doing any of the research and dd themselves. Sure Wolf and the #wolfpack does research and DD, but unless you do it yourself, how can you be sure the research is any good?

So I thought I would take the morning off and do a little DD and research myself. Since SPLI has been one of the most popular marijuana stocks over the last month, I thought I would dig a little deeper.

In case you didn’t here, one the 3rd of April, a press release stated that Vapor Group had acquired majority share in the electronic cig company American vaporizer, LLC who owns the brand American Smoke. Awesome right? This has to be excellent news that will see this stock become one of the major players in the e-cig industry right?

So I googled American Smoke and visited their website. I was very impressed with there package design for American Smoke. With a background as a creative director, I know that packaging sells. A defiant plus. I took a small sip of cherry flavored kool aid.

So I googled and googled and googled some more. And then my initial surprise kind of dwindled away.

I find out that there are at least 250 companies competing for a piece of the market. And one of those companies, Lorillard – which trades on the NYSE under the symbol LO – owns about 50% of the market. AND, Altria Group (NYSE: MO) and Reynolds American (NYSE: RAI) are 2 other huge players and will be releasing their e-cigs in the near future.

Really? So after MO and RAI jump in with their gigantic budgets, there will be 247 companies competing for a small piece of the pie?

I think I just spit out my kool aid.

I did.

Ladies and gentlemen, this was found after only a few minutes of research. So let’s do some more.

I live in Capitol Hill, one of the most densely populated areas in all of Seattle, which will be the next big city to legalize recreational marijuana in the coming months. So what do I do? I go down the street to one of the most popular smoke shops in the city to check out their dry herb vaporizer selection.

When I asked the “vape expert” behind the counter if they carried any products by Vapor Group, he responded by saying he had never heard of the brand. He then proceeded by showing me several of the brands he did carry, all developed by private companies. One of the biggest selling vapors he carries which has been on the market for nearly 10 years.

But before I left the “vape expert” recommended that I purchase one of the convection style vaporizers that heat the dry herb evenly and in a controlled fashion . Interesting and funny. The Vapor group just released a press release today that stated it will be exhibiting its “cutting edge” and highly “unique” vaporizer at the Cannabis Cup in Denver later this month. The press release states “vaporizes dry herbs by gently heating them with pure, heated air inside a heating chamber at a controlled temperature.” Doesn’t sound so unique, does it?

So I returned home, picked up the phone and started dialing numbers of vapor shops in Seattle. None of the recipients of my phone calls had never heard of The Vapor Group. And it’s not until you google some online vape shops that you realize there is a lot of competition in the dry herb market.

Listen folks, I didn’t do a whole lot of research. This was all done over a cup of coffee. With that said, I still have a whole lot of research to do before I would rule out this stock entirely or I recommend this cannabis stock to a loved one.