How Analysts Are Asleep At The Wheel Regarding Psychedelic Stocks

In short, the only reason why psychedelic stocks haven’t resumed the rapid ascent we saw in 2020 is that not enough investors are active in trading these stocks at present.

Analysts afraid to cover psychedelic stocks?

This begs an obvious question: where is the analyst coverage of the pubcos in the emerging psychedelic drug industry?

To play Devil’s Advocate, one obvious reason for the sparse coverage is that these drugs remain (heavily) controlled substances in most jurisdictions. Also, with much of the prior analyst coverage on cannabis stocks not bearing fruit (to be polite), analysts may be reluctant to cover psychedelic stocks.

We will address that latter point a little later.

It’s not just investment banks that are eagerly funneling capital into this industry. Even a mainstream commercial bank, the Canadian Imperial Bank of Commerce (US: CM / CAN: CM) is already heavily involved in the industry. As The Conscious Fund observed in a recent article, CIBC is providing backing for Compass Pathways, MindMed, and Numinus.

When commercial banks start to jump into an industry, most retail investors look at that as a green light to become involved themselves. So where are the analysts, to point to the many bargain-priced stocks in this emerging industry?

Afraid to provide coverage because of previously mis-forecasting the evolution of the cannabis industry?

We can see who is not afraid of psychedelic stocks: investing heavyweights like Peter Thiel, Mike Novogratz, and Kevin O’Leary.

O’Leary, TV Host of the investor program Shark Tank, is an outspoken bull for the psychedelics industry. He’s just as emphatic about refusing to touch cannabis stocks. And in general, the cannabis industry has never drawn as many of these big-name investors. Why?

Psychedelic stocks are a much different (better) opportunity than cannabis

Psychedelic Stock Watch has previously highlighted some of the key distinctions between the legal cannabis industry and the psychedelic drug industry. Primarily, it centers around the path to (full) legalization.

There are important reasons to expect [drug legalization] dynamics to play out in an opposite manner when it comes to psychedelic drugs.

  1. Many political inducements for legalization
  2. Strong corporate support for psychedelic drugs

Psychedelic Stock Watch has presented the policy arguments in favor of legalizing psychedelic drugs on many occasions.

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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 Watch.

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