My Weedstock Buying Strategy
I’m going to describe the strategy I used to buy weedstocks when I first started buying in. I didn’t even really know it was my strategy at the time but looking back I’ve done it a few times and now see that has worked out.
Initial Due Diligence
Normally I start looking into a company, checking out their website, looking at their financials. I’m not a pro investor so the financials are hard for me to truly know whats going on. Usually like to see that the company has some cash to continue running their operation while not making any money.
I’ll do another post on due diligence later on… don’t want this post to be about that.
Buying a Hi Risk Weedstock
When I first started investing in the sector not that many companies were fully established. When I first bought into ACB.T the stock was around .45-.50, they had a 50,000 sq ft grow site. Bought in before Aurora Sky was announced.
I put a small amount of money into the stock, get my initial position in the stock and wait… What I feel is a small amount or what I’m willing to lose.
I’ve done this with LG.V and MMJ.V buying into both of these companies at the .12 range. I’ve been waiting and watching to see the companies start pulling off their advertised plans. Seeing LG.V pull out of Cuba and focus solely on MJ production was a good sign.
After I see more positive news and start to trust management more, I start adding to my position. I recently added more shares of LG.V before the recent run up. In hindsight I should have bought more.
The above pic is out of of date. LG currently sits around .28 now. You can see I bought a small position and then bought a bit more at a higher price. Now both of these have buys have doubled. I only put another $300 in because I had some dividend income sitting in my account. So doubled my dividend, can’t complain.
Buying at Higher Levels
It sucks to buy a stock at a higher price than your initial position. A lot of time we end up thinking, man if I had bought 10x times more shares I could have made sooo much money. You could have also lost all that extra money.
I think the most dangerous time when buying a stock is when you first make the purchase. At that short time frame the stock can go up or down and you are now at a loss.
When you have already put a small amount in and you have some profit in the stock, it helps buffer your next purchase…mentally anyways.
Example- You buy a 1000 shares of a $1 stock. It goes up to $2, you now have $1000 profit. You could now buy $1000 more of the stock at $2. Sure you can only buy 500 shares now, but if the stock goes back down to $1.5 you are still up $250. At that time you can either load up more or panic sell like someone who doesn’t believe the stock will go back up…. I would buy more.
You could easily call this dollar cost averaging. Buying a small position at first instead of going full out right of the bat. You don’t want to end up panic selling when your 10 grand you put into a .10 stock starts dropping.
ACB.T is one of my most profitable stocks I’ve bought. I initially put $2,000 into it. Shortly after they announced Aurora Sky and the stock went up. I bought two times at the 1.23 price range as the stock went up and down. I had already doubled my money on the initial purchase so I had some room for the stock to go down without losing any money.
I feel better when I know I could sell the shares at 1.00 and still make some money. It cuts into the profit a bit if that were to happen, but it allowed me to continue building my position.
As you can see I bought a bunch of times around 2.10. I even bought at 2.61 and then the stock dropped back down to 2.12. I was down on that purchase so I bought more.
I guess the key take away from this post is dollar cost averaging. You don’t have to go all in right off the bat on that next new penny weedstock. Buy in chunks spread out over time. You should start seeing the company progressing and if not you can move onto another company and let those purchase sit for a while. Time in the market beats timing the market is a quote for a reason.
It all comes down to boring old DCA. I thought I was doing something special, nope.
Hope this helps you enter that penny stock, good luck!