Canopy Growth Corp (WEED)

[Bazwar6]

To make really big money in small caps you have to get in before the big boys do. That means investing in fledgling companies that will grow enough for institutional investors to take notice and follow suit.


Shares of the Toronto-based Concordia Healthcare Corp., which sells legacy pharmaceuticals that treat conditions such as asthma and attention-deficit hyperactivity disorder, have risen almost 600 per cent since the company went public late last year.


That’s not easy, but here’s a tool that can help: the list of companies that graduate from the TSX Venture Exchange to the big league TSX. This approach led me to a stock idea that looks very promising for both an attractive short- and long-term return. More on that stock shortly. First, the thesis:

Since 2000, 608 Venture companies have made the rite of passage to the TSX. Roughly half are still listed, the rest having disappeared through merger, acquisition, privatization or delisting.

More encouraging is that about a fifth graduated to the S&P/TSX composite index – a sign of cachet and success, because only the best and growing companies are invited to join this benchmark.

It’s difficult, if not impossible, to calculate how well you would have done investing in these graduates, although it seems quite well.

But recent data give a better indication.

In 2013, 20 companies graduated from the Venture Exchange. On average, this basket of stocks did exceptionally well.

If you invested in those companies that had revenues, the average return was 128 per cent. Four of the 14 stocks delivered more than 100 per cent. The median would be about 12 per cent (both figures include dividends).

Of even greater interest, in the first three months after graduation the average total return was 15 per cent and the median 6 per cent – both very good returns.

These are limited data but they do suggest both a short- and longer-term pop on stocks that graduate, which makes sense. Companies don’t uplist, with all the expense and hassle that entails, unless they’re confident that business is getting better. And it’s absolutely true that some large institutions just won’t look at Venture-listed names.

http://www.theglobeandmail.com/globe-investor/investment-ideas/patient-home-monitoring-high-marks-to-uplisted-tsx-venture-stock/article25085422/