A New Type Of Vice Stock Is Emerging In 2021 But Should You Buy Them?
The excitement in the stock market from massive, short squeezes in Reddit stocks like GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC) has sparked a frenzy of retail buying. This excitement helped drive momentum for many other stocks including penny stocks. The action was so heavy that brokers like Robinhood restricted trading activities in more than just a handful.
According to Robinhood, the reason for the move was for protection. In an email sent out to customers, the company said, “We had to take steps to limit buying in those volatile stocks to ensure we could comfortably meet our deposit obligations. We didn’t want to stop people from buying stocks, and we certainly weren’t trying to help hedge funds.”
Millions of retails traders are now gaining a bit more respect. What’s the next round of Reddit stocks to watch? Earlier this week, it was thought to have been silver. However, a quick look at any of the popular stock market sub Reddits revealed conflicting stories. What’s more, is that the “silver rally” was short-lived, much shorter than we saw in GameStop, for instance. So, there’s a good chance the Reddit-angle was a bit overblown concerning the precious metal.
What’s The Next Move For Retail Traders?
One of the emerging trends we’re seeing is in vice stocks. While these aren’t experiencing parabolic moves like many of the “short squeeze stocks,” they have seen a much stronger trend as of late. Vice stocks are traditionally in industries like tobacco, gambling, and alcohol. But there are different companies in focus by the next generation of traders, which now includes industries like cannabis and psychedelics.
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Looser restrictions on things like cannabis and even psychedelics could have celebrations looking (and feeling) much different in 2021. The exciting part is that vice stocks may be the unsung heroes right now. After hitting record lows last March, the AdvisorShares Trust Vice ETF (NYSE: VICE) has recovered by over 100%.
Though it is a lower volume ETF, it has reached new all-time highs this week. You’ve also got to consider that VICE is reaching these highs while broader markets have stutter-stepped recently. Aside from what the Reddit crowd has to say, some Wall Street analysts have already weighed in, and the outlook may be more bullish than you think for some.
Marijuana Stocks To Watch
Right now, the focus for many investors is on the United States cannabis industry. With new states going legal following the U.S. presidential election, eyes are on the current administration’s directives. Along the campaign trail, President Biden and Vice President Harris voiced confidence in legal marijuana.
Additionally, this week U.S. Senator Ron Wyden, tweeted out “We can’t address our country’s racial inequality crisis without ending the outdated, dangerous war on drugs and its disproportionate impact on Black and Brown Americans. @SenSchumer @SenBooker and I are going to introduce legislation to do just that.”
The group aims to release a discussion draft in the early part of this year to develop legislation.
Obviously, for the Robinhood crowd, choices are limited to the majority of Canadian-based names. That’s because most marijuana stocks are listed on the OTC as far as U.S. companies go. The platform made famous by millions of new customers, making it the platform of choice in 2020, has few options to gain exposure to future government initiatives.
U.S. Marijuana Penny Stocks Favored By Analysts
One of the more actively traded names among this group has been Sundial Growers (NASDAQ: SNDL). The marijuana penny stock trades hundreds of millions of shares per day and has announced and closed on hundreds of millions of dollars in financings over the last few months. That has become a significant cause for concern with many traders due to the higher risk of dilution. But what do analysts think about the company? Right now, CIBC has Sundial at Neutral, and BMO Capital gave the stock a $1 target with a Market Perform rating last summer.
There are several marijuana penny stocks that analysts like much better than Sundial. Names like Harvest Health & Recreation (OTC: HRVSF), which is building out its foothold in the U.S. market right now. Canaccord Genuity recently boosted its price target to $7 and maintained a Buy on the stock. Stifel Nicolaus upgraded its rating on the stock late last year from Hold to Buy.
Vireo Health (OTC: VREOF) is another marijuana penny stock with bullish analyst sentiment. In Q4 of 2020, Canaccord reiterated its Buy rating and set a $2 target. Since then, shares of Vireo have reached and surpassed that target price so far. The company recently closed on the purchase of cannabis licenses in Nevada. These allow the company to cultivate and produce medical and adult-use cannabis products in the state.
Psychedelic Stocks To Watch
Some compare the current market for psychedelic stocks or magic mushroom stocks to that of early pot stocks. When you look at some of the investors in this industry right now, it brings a different sense of confidence that may not have existed during the early days of legal cannabis. Notably, Peter Thiel was one of the big names behind the Compass Pathways (NASDAQ: CMPS) IPO last year. Despite being down on the year, Compass is up over 100% from its IPO Debut. H.C. Wainwright most recently weighed in on Compass, giving it a Buy rating and starting it with a $65 price target.
Once again, however, if you’re part of the Robinhood trading crowd, magic mushroom stocks are limited. You’ve got companies like Seelos Therapeutics (NASDAQ: SEEL) with a ketamine treatment platform for mental illness. SLS-002 is Seelos’ intranasal racemic ketamine for treating acute suicidal ideation and behavior in major depressive disorder patients. But as far as a “pure-play,” the choices are penny stocks that are OTC listed.
Mind Medicine (OTC: MMEDF), or “MindMed,” for instance, has gained popularity since its IPO. It makes up just under 10% of the newly listed Psychedelic Stock Index ETF from Horizons. MindMed was backed by notable investors as well. These included Shark Tank host Kevin O’Leary and former Canopy Growth CEO Bruce Linton among others. One of the latest initiatives of MindMed is blending digital technology with psychedelic-assisted therapy.
Last year the company launched a digital division, Albert, utilizing virtual reality and psychedelic care. MindMed is also conducting trials for things like LSD. In an industry-first, the company recently began a clinical trial measuring and evaluating MDMA and LSD’s combination in the human body. This progress was enough to attract Canaccord analysts who issued a Buy on the stock. The last price target from the firm came in November at $2.
Are Traditional Vice Stocks Dead?
It isn’t to say that “Vice Nouveau” is the only thing to focus on right now. There are still plenty of traditional vice stocks to watch. Since new vaccines are hitting the market, hopes are high that we can get back to some sort of normalcy. If or when that happens, I’m sure we’ll see plenty of entertainment venues putting on shows.
With that comes plenty of tobacco and alcohol. You’ve also got to think of the return, in full, to places like casinos and resorts. These traditional “sin” industries aren’t going away. But as the market & the world changes their outlook on things, it might be worth it to identify a new trend in vice stocks right now.