Countdown To Psychedelic Stock Rally, Part 1: Individual Drivers

Psychedelic stocks had a tremendous rally last Fall. A number of companies posted very large gains – on generally heavy volume.

These stocks corrected during the thin trading of the Holiday Season and have remained more-or-less stuck in a trading range in the early weeks of 2021.

Why should investors expect an imminent end to this holding pattern?

Psychedelic Stock Watch will answer this question from two angles: the drivers for individual companies and sector-wide catalysts. Part 1 will focus on the individual drivers.

A multitude of factors could lift psychedelic stocks, on an individual basis:

  1. Analyst coverage
  2. Capital infusions
  • M&A
  • Organic growth
  1. R&D breakthroughs
  2. More financings

Analyst coverage powers psychedelic stock break-outs

We observed that in early 2021 psychedelic stocks have “more or less” been stuck in a trading range. Two exceptions to this are Field Trip Health (CAN: FTRP / US: FTRPF) and Cybin Inc (CAN: CYBN / US: CLXPF).

Random chance? Hardly.

On January 14, 2021, Stifel GMP initiated coverage on Field Trip and Cybin, with price targets of CAD$8.50 and CAD$5.00 (respectively). FTRP had closed at CAD$3.55 the previous day and CYBN had closed at CAD$1.86.

Since that time, Field Trip is up roughly 60% to CAD$5.75 and Cybin is up nearly 20% to CAD$2.19 –despite retail investor sentiment in the sector currently weak.

Are we going to see more analyst coverage of psychedelic stocks? A better question is why haven’t we seen more analyst coverage?

One would think that these analysts would have already dived into an emerging sector that has attracted investors like Peter Thiel, Mike Novogratz, Bob Parsons, Kevin O’Leary, Tim Ferriss, etc., etc. After all, that is their job.

More analyst coverage of psychedelic stocks would seem to be seriously overdue.

Given all the media attention for the sector, the high-profile investors, and the huge flows of capital into the industry, we could easily see a flood of such coverage emerge over the near term.

Capital drives growth

One of the basic strategies when investing in small-cap growth stocks is to buy stock shortly after a company has completed a financing.

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Disclosure: 

 

The writer holds shares in MindMed Inc, Numinus Wellness, Cybin Inc and Mind Cure Health. Mind Cure Health is a client of Psychedelic Stock ...

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