This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Up in smoke: Why I sold my marijuana stocks

By John Linnemeier

In my opinion, the market as a whole is somewhat overvalued at this point and we may be due for a correction sometime within the next few months.

When this might occur is extremely difficult to foretell. I couldn’t help noticing that the term biotech bubble is starting to come up far more frequently in the business press and Google Trends recently.

Valuations are obviously extremely high in the biotech sector. In my opinion, they deserve to be pretty high since innovation in this field is occurring at a breakneck pace and practical new applications are showing up all over.

The problem is that, at least in the short term, stock prices reflect the market’s perception of what is going on. Since I jump in and out of stocks fairly rapidly, I have to take this into consideration in order to potentially maximize the portfolio’s return.

I was a little wary of my two biotech ETFs, iShares NASDAQ Biotechnology Index (IBB) and ProShares Ultra Nasdaq Biotechnology (BIB)–and have sold both positions. They mirror the biotech sector in general.

They’re obviously weighted heavier towards larger companies.

I can easily see them taking a hit if the market becomes a little disenchanted towards the sector as a whole. That’s basically what happened to 3D printing stocks not long ago. That’s why I got out of 3D Systems Corporation (DDD) last month.

I continue to hold Illumina (ILMN), the preeminent company in gene sequencing equipment in my opinion. They’re solid and all signs point towards continued growth in this area.

I also have kept my position in Neuralstem (CUR), which is a company working with stem cell treatments for Amyotrophic Lateral Sclerosis (Lou Gehrig’s Disease) and down the road perhaps spinal chord injuries.

I’ve liquidated all my holdings in marijuana stocks. They’re for the most part too thinly traded and it’s too difficult to separate the wheat from the chaff. Somewhere down the line when more states legalize the recreational and medical use of marijuana, and solid stocks with solid earnings begin to become evident, I’d love to get back into the game.

I liquidated my positions in Intuitive Surgical, Inc. (ISRG). It’s an interesting company which has the potential to revolutionize surgery through the use of robotics, but for now sales of new machines are down, so that’s been reflected in the stock’s price.

I had hoped to get in on what I thought might be a resurgence of the stocks price, but when the market started to go south on this one I jumped ship.

I recently bought Inovio Pharmaceuticals (INO). It’s a biopharmaceutical company that holds promising candidates in its pipeline for the treatment of cancer and infectious diseases.

It is also carrying out research into Intramuscular Electroporation Delivery Devices, which is a means of delivering DNA based vaccines. I don’t have the room to go into the details (for those interested, here is a link to an excellent write-up in Seeking Alpha). I have now way of knowing this for sure, but this company has the potential to revolutionize medicine as we know it and I’m proud to be a shareholder in it.

I discovered another company called FireEye (FEYE), a cyber-security firm. The company recently acquired Mandiant, for a very good price in my opinion, and earned a lot of respect by “directly implicating China in cyber espionage to gain economic advantage.” For those interested in going into this in greater detail, here’s an excellent post on the company.

Tekmira Pharmaceuticals (TKMR): I got into this stock for the reasons stated in this Seeking Alpha writeup:

"Tekmira has been able to overcome past failures of RNAi biotechs by developing what this RNAi space calls a “delivery vehicle” for the RNAi oligonucleotide. In the past scientists attempted to deliver RNAi oligonucleotides as a single naked siRNA–small interfering RNA–that would attempt to penetrate targeted cells. The problem with the RNAi sector came about when many biotechs failed to get the RNAi strand into cells successfully. This is where Tekmira’s “lipid nano particle” technology comes in."

For those interested in looking into the pros and cons of this particular equity, I invite you to check out the entire article here.

DISCLAIMER: The investments discussed are held in client accounts as of February 28, 2013. These investments may or may not be currently held in client accounts. Investments in securities of small-cap and growth companies may be especially volatile. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.

John Linnemeier

John Linnemeier

I'm a writer. The book "How an Average Man Lived an Adventurous Life" is my autobiography. I've spent much of

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.19 -1.04%
FB $118.06 0.54%
GOOG $695.70 0.48%
TSLA $222.56 -4.20%
YHOO $36.00 -0.03%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs