Why Smaller Psychedelics Companies Should Start Catching Up To The Sector Leaders

TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.

Wealth inequality has become a huge story in our societies. The reckless and unprecedented injections of capital into our markets and economies by central banks has (mysteriously) been concentrated as increasing wealth in the pockets of – relatively speaking – a handful of multi-billionaires.

However, market cap inequality among public companies is another huge story. Except it’s not called market cap inequality. It’s simply referred to as “concentration” of stock ownership. And in U.S. markets, it’s also at unprecedented extremes.

The general concentration of stock ownership in (specifically) U.S. markets is rather easily explained.

Fueled by the oceans of additional central bank funny-money, markets have largely degenerated into crazed casinos.

Manic gamblers, masquerading as investors, chase momentum. The fat gets fatter while most other public companies drift.

This may make ‘sense’ (to the gamblers) with respect to the mature large caps that largely populate the S&P500 and even the Nasdaq.

These companies are generally in mature sectors. With multinational corporations totally dominating most of these sectors, increasing concentration of investor capital is at least somewhat understandable.

Psychedelic stock ownership becomes much more concentrated

What about the increasing concentration of ownership in psychedelic stocks?

Immediately after the Compass Pathways (US: CMPS) IPO, there was one big fish in the sector: Compass Pathways itself. CMPS had a $1+ billion market cap.

The remainder of public companies were relatively evenly distributed in size: from microcap startups to a few companies in the $100 - $200 million range. Very little concentration outside of CMPS.

Concentration started during the big 2020 rally, which began when Compass commenced trading on September 18th.  MindMed Inc (US: MNMD / CAN: MMED) and Numinus Wellness (CAN: NUMI / US: LKYSF), in particular, began to outpace other stocks by a wide margin.
By early November, concentration in the top-5 stocks was near its 2020 peak.

Again, this is somewhat understandable. In any significant market rally, an investor’s portfolio tends to become more concentrated as the winners outpace the also-rans.

However, market cap concentration among psychedelic stocks has continued to increase and is actually higher today. This comes with most stocks well off previous highs and overall conditions in the sector not as hot as they were last fall.

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Disclosure: The writer holds shares in MindMed Inc, Numinus Wellness, Cybin Inc, Mind Cure Health and Novamind Inc.

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Lorimer Wilson 1 month ago Contributor's comment

Another very interesting article, Jeff. Your readers might also be interested in my latest article (updated weekly) entitled "Psychedelic Drug Stocks Category Is +6% Month-To-Date" talkmarkets.com/.../psychedelic-drug-stocks-category-is-6-month-to-date. Keep up the great work!