Countdown To Psychedelic Stock Rally, Part 2: Sector-Wide Catalysts

Psychedelic drug stocks are overdue for the next leg of their rally. After weeks of sideways trading, that would seem to be a fair conclusion based upon an objective look at this emerging industry.

This assessment starts with the Mental Health Crisis. Over 1 billion people suffer from stress-related conditions like depression, anxiety, addiction and PTSD.

Existing standards of care for these conditions are grossly inadequate. Clinical trials on psychedelic drugs show the clear potential to not merely improve the standard of care but to revolutionize treatment for these mental health conditions.

Mental health treatment eats up roughly $300 billion in spending each year in the United States alone. Much of that money is currently being funneled into therapies that offer minimal efficacy.

There is a big opportunity for the psychedelic drug industry. Yet most psychedelic stocks have been stuck in a trading range since late December.

Part 1 of this series looked at the individual drivers that could kick-start new rallies for these companies. In Part 2, we’ll take a broader look at the sector-wide catalysts that could easily launch a major new rally in this space.

  • Cheap stocks
  • Rotation into biotech
  • A cashed-up sector
  • ATAI IPO
  • MindMed uplisting

Cheap stocks

In December, with psychedelic stocks at their 2020 peak, a few of these companies were looking quite expensive.

Both MindMed Inc (CAN: MMED /US: MMEDF) and Numinus Wellness (CAN: NUMI / US: LKYSF) delivered ten-bagger returns from mid-September into early December. Several other companies produced multi-baggers.

As these companies were hitting new highs, they were also cashing up with very robust financings. As Psychedelic Stock Watch noted in Part 1, public companies (alone) raised US$371 million in the final months of 2020 and into early 2021.

Then they corrected. Several of the psychedelic stocks that delivered the best returns in 2020 were discounted significantly from their 2020 highs.

Lower stock prices + a lot more cash = cheap stocks.

By our calculation, Mind Cure Health (CAN:MCUR / US:MCUR) is currently the cheapest, with a cash-to-market-cap ratio of ~3:1. But most psychedelic stocks are looking attractively priced at current market capitalizations.

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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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Kevin N. Harris 3 weeks ago Member's comment

Great article, really enjoy it.