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The stock market reacted in a volatile manner to President-elect Donald Trump’s first press conference since the election.
Cannabis stocks were not immune from this volatility and we are closely monitoring biotech stocks levered to the cannabis industry as yesterday’s trading activity was not like anything we have seen before.
An Unprecedented Reaction
The market has never seen one person have such an impact on global market activity and want to briefly highlight how the President-elect’s comments impacted the markets, specifically that of the biotech sector.
The iShares Nasdaq Biotechnology ETF (IBB) serves as a benchmark for investors and tracks the investment results of the Nasdaq Biotechnology Index, which contains securities of listed companies classified as either a biotechnology or pharmaceutical company. The IBB was trading higher early on in the trading day but plunged on Trump’s comments and ended the day down 3%.
The Dow Jones Industrial Average was up more than 100 points right before Trump spoke. Within 15 minutes, the index fell more than 125 points. The Dow ended the day well off its lows and market futures are lower this morning.
Banking on Biotech
Although we continue to expect the biotech sector to be the greatest beneficiary of the legal cannabis movement, we are watching how these companies are impacted by a new White House administration.
The biotech sub-sector of the cannabis industry is comprised of some of the most mature cannabis businesses. We continue to view these companies as some of the most attractive cannabis investments and want to discuss how these companies were impacted by Trump’s comments.
- GW Pharmaceuticals (GWPH) ended yesterday down 3.8% and we remain bullish on the company due to its deep pipeline of pharmaceutical products that are in advanced stages of FDA testing. The company has a number of catalysts in the back half of 2017 and we see significant upside to current levels.
- Zynerba Pharmaceuticals (ZYNE) ended the day down 3.1% and we continue to see significant upside to current levels. The average Wall Street price target on ZYNE is north of $30 and we view the company as an acquisition candidate for any biotech company interested in the cannabis industry.
- Insys Therapeutics (INSY) rallied off its lows yesterday and the company was the top-performer when compared to its peers. INSY ended the day down 1.1% and the shares are down more than 60% in the last year. We believe that all of the legal concerns are priced into INSY and see upside to current levels. Like Zynerba, we view Insys as an acquisition candidate and view the company as a long-term investment opportunity.
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Important Investor Disclosures
Disclosure. Compensated Affiliate. This report was authored by and is property of StoneBridge Partners LLC. All information and data relied upon in drafting this report is publicly available. The author believes and considers its sources to be reliable, but does not guarantee the accuracy or completeness of any information contained in this report. Any and all information, data, analyses and opinions are provided for informational purposes only and is not intended, in any manner, as investment advice. Any projections or other information generated by StoneBridge Partners LLC regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. None of the material contained in this report is intended as a solution or offer to sell or purchase a specific stock or any other investment. This report is not directed to, or intended for distribution or use by, any person or entity that is a citizen, resident or located in any municipality, state, country or other jurisdiction where the distribution, publication, availability, or use of this report is contrary to any governing law or regulation. The securities discussed in this report may not be eligible for purchase and/or sale in certain jurisdictions or by particular individuals. It is important that you check any and all governing laws and/or regulations that may be applicable in your jurisdiction. Investing in securities of issuers organized outside of the United States, including ADRs, entail certain risks. The securities of non-United States issuers may not be registered with, nor be subject to the reporting requirements of the United States Securities and Exchange Commission. Please contact a Financial Advisor for professional advice regarding any and all securities investments. This report is intended for informational purposes only. StoneBridge Partners LLC’s officers, directors, employees, affiliates, or subsidiaries may have positions in securities covered by StoneBridge Partners LLC. StoneBridge Partners LLC receives compensation from the company and/or has a position in the securities mentioned in this report
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