Warren Buffet said that investing requires more qualities of temperament than of intellect. If we follow this advice, that would mean buying stocks because you’re in the mood, not because you foresee their great potential for good returns. Therefore, we will follow Peter Lynch’s advice that investing in stocks is not a science but an art. Choosing the right stocks to include in your portfolio is not always easy when you are bombarded with so much information about each publicly traded company. For this reason, let’s help narrow your options by looking at a specific company: Sundial Growers. Now that Joe Biden is in office and there is hope for marijuana legalization, is Sundial Growers’ action a smart investment? Most analysts don’t think so, and here are a few reasons. Here’s why you should put off buying Sundial Growers shares.
There is no hope of legalizing cannabis in the United States
According to Investor Place, the clearer it became that Joe Biden was replacing Donald Trump, the more Sundial Growers shares continued to rise. It even went as high as 17 cents a share, which was an impressive 175% increase. However, the article said that it was still too early to start counting your chicks. The actions were going well because it was expected that once Biden became president of the United States, cannabis would be legalized, as the MORE (Marijuana Opportunity Elimination and Reinvestment Act already exists waiting to be passed. They weren’t interested in Biden’s speeches may not have noticed that he supported having those arrested for marijuana-related crimes have a clean slate.Biden avoided speaking publicly about legalization, which is the first section of the MORE Act. Furthermore, with the leading Senate majority having a lot of influence in passing such bills, those hoping for marijuana legalization are unlikely to get their wish. After all, the current Majority Leader has been very communicative about his position on the MORE Act. Therefore, even if the House of Representatives passes the bill, it is unlikely that the President and Senate The United States supporter of legalization and decriminalization.
Being debt-free doesn’t mean you’re out of the woods just yet
Also, since it is never advisable to invest in a company with a lot of debt, Sundial Growers quickly took care of your debts. CEO Zach George announced in December 2020 that, unlike other cannabis companies with a significant debt burden, Sundial Growers had been debt-free. According to PR Newswire, he explained that after running out of cash and having to resort to debt to stay afloat, the company had finally shed $ 227 million in debt.
Unfortunately, even if being debt free attracted a lot of positive attention, stock market analysts still opined that it had not yet made a good impression on investors. Some investors still rushed to buy the shares causing the shares to rise 177%, but the company is not yet making progress on the income statement. They did not meet target revenue, but instead suffered a loss of $ 71.4 million in the third quarter, almost double the loss of $ 32.8 million experienced in the second quarter. Such poor performance led analysts to expect the fourth quarter to be much worse; they anticipated a 6% loss in the company’s shares. While being debt-free is commendable, Sundial Growers put its shareholders’ investment at risk by diluting the shares. The outstanding shares grew from 72.8 million to 206.7 million, which means that the value of the shares decreased; Not surprisingly, the minimum increase is seen as the company’s saving grace.
The future is hanging by a thread
The future may be a mystery, but when you invest in stocks, you want to hope that the stocks you are buying are worth much more. Sundial Growers stocks don’t give you that luxury. According to Forbes, in addition to stocks spiraling downward and financial statements very weak, the future of the company is difficult to predict. While the first day of trading came with a decline in the stock, which the CEO blamed for a scandal, it has gone from trading at $ 13 during the IPO to less than a dollar today.
The price of the stock below a dollar makes it a very bad choice to invest. So you have to be careful because it could be removed from …