Should you hang on to Ascent Industries (CSE: ASNT)?
QUESTION: Thanks for your newsletters. I now follow them intently. I’m attending a financial conference and the presenters are heavily weighted towards investing in U.S. cannabis companies compared to Canadian companies.
I’m quite happy with my CAD investments: Khiron (TSXV: KHRN), iAnthus Capital (CSE: IAN), Aurora Cannabis (TSX: ACB), Trulieve Cannabis (CSE: TRUL), Sunniva (CSE: SUNN), and Organigram (TSXV: OGI) so I may now add a few US companies such as Cannex and Green Thumb but I’m surprised at the heavily weighted focus towards US investment.
One other consistent theme at this conference is to sell your losers and I do have one loser in my portfolio Ascent Industries (CSE: ASNT). I’ve lost about 60% of my investment in this stock. But I saw it mentioned in your recent newsletter so I’m wondering if you’d be able to share your opinion of whether I should hang on to it.
L. C. from Canada
ANSWER: A couple of things. First, U.S. companies doesn't mean U.S. literally. For example, I would say SNN qualifies as a U.S. company because that is where most of their operations are located. Organigram money left from their last financing to invest internationally. And 1933 Industries (CSE: TGIF) that I just visited in Nevada to see their expansion would also be included in that group even though it is listed in Canada. KHRN is a South and Latin American operator and recently announced a Joint Venture with Dixie Brands (CSE: DIXI) that will see their Kuida® wellness product distributed in the U.S. I suspect most speakers had a much broader definition in mind.
My guess is the speakers were indicating they favoured companies focussed outside of Canada. In that case, I agree with them. The speakers probably meant looking outside of Canada - a position I agree with. If you go back to my yearend forecast summary for 2019, “In looking ahead at 2019, I see the Canadian cannabis stocks pulled upward by companies operating in the U.S…..In addition to the United States, I expect attention will be drawn to Latin America, South America and Europe.”
As for Ascent, I would have expected a Health Canada response by now. I said when the troubles came to light, the longer it took for a decision the more likely it might be something better for Ascent because there is obviously something that could be worked out. I guess if it's your only loser, I would hang on for now. Anything better than having their licenses revoked could lead to a little pop in ASNT. I don't think you'll see your cost anytime soon but that doesn't matter. If it pops, you'll have a chance to get out at a better price.
Oh. By the way. Don't forget about 1933 Industries (CSE: TGIF).