I’m not exactly sure when this meme trading phenomenon will end, although I’m fairly confident that – like other market phenomena over the centuries – it will eventually do so. In the meantime, I fully respect the potential for Tilray (NASDAQ:TLRY) to enjoy the fruits of the movement. Since the closing low of May this year, TLRY stock is up 11%.
As well, some technical justification may exist for wagering on Tilray. If you pull up a one-year chart for TLRY stock, you’ll notice that since late September/early October of 2020, shares have been charting a series of lower highs. This dynamic supports the idea that TLRY may have some legs remaining, although the lack of a corresponding series of higher highs is something to bear in mind.
Still, betting on TLRY stock exclusively because of what you hear from the social media crowd is fraught with risk. Primarily, this crowd is too emotional. It’s not just about the “apes together strong” line that permeates every heavily followed meme trade. Proponents are also leaving angry comments about what is and isn’t a meme stock.
Two things: first, the common defense against misclassification of meme stocks almost always falls under the no-true-Scotsman fallacy. Second and more importantly, it’s never a good idea to trade on emotions, particularly anger. As Psychology Today mentioned, anger reduces your IQ by 10 to 15 points – and you’re going to need all the help you can get deciphering these types of speculative opportunities.
I also mention emotions because as I pointed out in my last write-up for TLRY stock, the insiders are the ones who are least likely to HODL (hold on for dear life). Sure enough, information arrived following my article that another insider, Kennedy Brendan, sold off 800,000 shares on June 18.
Could the New Normal Help TLRY Stock?
To be 100% fair, I don’t know the motivation behind why insiders are selling their holdings of TLRY stock. As I’ve mentioned regarding the topic of insider selling, it’s possible that these executives simply want to enjoy the fruits of their labor. To the victor goes the spoils and all that jazz.
But I mention the selling because it’s important to keep those emotions in check. Granted, it’s fun to be part of a broader movement so I understand the appeal of TLRY stock. However, when the executives of the company you love so much don’t feel the same optimism, it should at least be a springboard for further investigation.
Now, when it comes to the topic of botanical investments, I’ve covered multiple angles – and the same ones multiple times. But the gradual return from the pandemic got me thinking: could the new normal provide a catalyst for TLRY stock?
I’ll concede this is a long-shot argument but stay with me for a second. A few months back, CNBC mentioned both in article and video form that working from home is here to stay. Personally, I have conflicted views on this thesis but let’s just assume that this circumstance will stick. If so, this could be a surprising benefit for Tilray.
First, the company has a strong presence in the U.S. legalized market, which include SweetWater – an infused lifestyle craft brewer – and Manitoba Harvest, which specializes in cannabidiol (CBD) wellness products.
Second, more people at home may lead to greater acceptance of CBD use. While CBD only contains a trace amount of tetrahydrocannabinol (THC) – if any at all – I’m sure your everyday worker bee is concerned about “trinkling” positive.
But if working in the cubicles is a thing of the past, I imagine that drug testing would also be canned.
Pays to Be Cautious
Still, I would ultimately be cautious about TLRY stock and other botanical investments. While some of the arguments supporting the green stuff is compelling, I’m turned off by the recent insider selling. Also, this is a very saturated and competitive market, one that hasn’t facilitated many opportunities for product differentiation. After all, weed is weed.
Then again, never doubt the power of the internet. If you know what you’re getting yourself involved in, I wouldn’t be opposed to a small portion of your speculation funds.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.