Blinded by Science
It is not difficult to feel the energy and dynamics of an emerging sector as exciting and newsworthy as cannabis. It seems to embrace and embody so many of the ideals and notions that many users have believed in, even defended for years in spite of the legal issues. The fact that many of the euphoric sensations are now being studied in labs, predicting great medical advances, only adds to the fever pitch. But hopefully information about those advances doesn’t turn out to be more like the pitches used by marketing firms and stock pumpers.
As long as companies have good management and business practices, these notions may be good reasons to believe in a company. Of course you are betting on the future but there is a reason we call people that look ahead visionaries. Vision and experimentation can create new products and industries that inspire one to invest. Investing implies looking ahead.
Vision can be a valid starting point for researching but knowledge about the companies should complement and validate that vision, not overwhelm you or confuse you. Serious-minded investors might welcome intellectual language after reading press releases about vaporizers or infused energy drinks. But it would be wise to be cautious of overly technical language as well as promotional lingo. It can be just as much a pump as marketing promotion.
You shouldn’t have to comprehend every minute detail of a scientific process or memorize the molecular chain of the latest product before you invest. You also shouldn’t need a medical dictionary just to read the latest press. Besides, for all the sophisticated language, running a company is also about more mundane procedures, like the nuts and bolts. A successful company will not only have success in their laboratory tests but will know how to apply the results into a profitable growing business, high-minded notions or not.
One bio-tech firm is fond of lengthy scientific explanations of its latest research. You might be convinced that if it’s so erudite, it must be good. Even if that were true, would you want to invest in a company that blinds you with science? As an investor, it is important to understand the larger picture and that includes seeing the business side.
Another company seems to constantly repeat the copyrighted name of its product in press releases. Unfortunately, it never seems to explain or address the constantly falling share price.
An investor should also be wary of being blinded by accomplishments. It may be impressive to read a long list of achievements by the company’s management. But a long list of inconsistent or irrelevant accomplishments may not be germane to the company’s development of its core product. This was illustrated by the recent press about a company’s Chief Medical Officer with an 18-page resume that doesn’t include a single reference to cannabis.
The cannabis sector is diversifying and will continue to do so, and perhaps in a different manner than any other sector that has come before it. There is a great potential market for related products and interface with other industries as diverse as security, software, lighting/spectrum research, medical or agricultural. Staying aware of these new developments shouldn’t mean you have to have an advanced degree in every industry.
It is only a matter of time before cannabis-related mutual funds are commonplace. You will be able to leave the research to others, at a cost of course. Until then, your own research is invaluable and could be much cheaper in the long run. You should be wary of companies that can’t provide concise and readable updates without resorting to dense scientific language. Even if the research is valid, it still has to be understood, especially if your investment is essentially helping to pay for company research. Does this high-minded language really serve the shareholder’s best interest or is it esoteric shop-talk?
Until you learn enough about a company, trust your better instincts but adapt them as you learn. Instincts or grand notions are never enough to predict a positive history. It helps to start out liking or believing in what the company does, but follow up with due diligence. If the company information is dense and inscrutable, maybe it doesn’t really want you to understand what it’s doing.