The Top 3 Short Sell Marijuana Stocks For High Risk Investors

Earlier this week marijuana stocks took a hit when Canopy Growth Corp. (TSX:WEED) failed to defend its 50 moving average, triggering what Midas Letter called an industry-wide sell-off. The most significant names in pot stocks soon followed with Aurora Cannabis (TSX:ACB) and MedReleaf (TSX:LEAF) quickly falling like dominoes.

Still, while no weed stock investor would ever bet against Canada’s most prominent Licensed Producers, pessimism in the industry means opportunity for those willing to take some risks. Short-sellers take some of the biggest risks out there; borrowing someone else’s shares, selling those shares, and hoping the prices fall even lower so they can buy them back at a profit. Of course, if prices go up, short-sellers could lose their proverbial shirts.

These are the top three short sell marijuana stocks for high-risk investors:

Insys Therapeutics

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Already having a tumultuous year, Insys Therapeutics (NASDAQ:INSY) most significant issues stem from the fact that this pot stock’s primary focus is on opioid drugs —a losing prospect in the age of epidemics. In fact, the company is under federal investigation for its alleged role in bribing doctors to push their drug Subsys, and typically federal investigations scare off shareholders.

The rollout of their cannabinoid-based drug Syndros has been slow, sending this potential weed stocks prices down near 35 percent over 2018. As Motley Fool recently reported, recent comments from company CEO Saeed Motahari added to investor worry when he stated that the market was declining for transmucosal immediate-release fentanyl drugs like Subsys.

With a short percent over float of 42 percent and almost 11 million short shares last month, it is hard to see Insys rebounding anytime soon in the eyes of investors. And with continued pressure from both the public and the federal government on all things concerning the opioid epidemic, the only thing that could spare the company, a favorable settlement concerning the investigation, seems like a long-shot.

22nd Century Group

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While considered a marijuana stock by most 22nd Century Group’s (NYSEMKT:XXII) primary focus is on developing tobacco with low levels of nicotine, giving the company a very 20th-century feel. As the FDA moves forward with plans to require tobacco to have minimal levels of nicotine, this part-time cannabis stock should, in theory, see its prices soar. And for the first three weeks of the new year, it did exactly that, before crashing back down and never recovering.

This weed stock develops cannabis plants with no THC as well as with optimized levels of cannabidiol (CBD). But with their hopes resting on the FDA’s tobacco guidelines, the future looks bleak for this next century weed stock. As experts point out, vaping is quickly becoming more popular than traditional cigarettes. Moreover, 22nd Century will never compete with the likes of Phillip Morris when it comes to tobacco.

22nd Century Group’s competitive place in the cannabis space is no better either, with a glut of companies dedicating more time and more resources to doing the same thing, only better. As one expert wrote, “XXII looks like a massively overpriced, glorified black-and-white TV,” not worth its near half-billion-dollar valuation.

Zynerba Pharmaceuticals

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Late last month ValueEngine lowered its rating of Zynerba Pharmaceuticals (NASDAQ:ZYNE) from “sell” to “strong sell.” In the fourth quarter the company reported a loss of $8.1 million; in fact, the marijuana stock recorded a loss of 60 cents per share. Worse yet, for the entire year, Zynerba’s losses fell to $32 million.

Zynerba is a risky short sell move as the stock’s volatility over the past few months —it increased to $12.8 at one time, and fell to a low of $7.98 —have it jumping all over the place. However, experts predict negative double-digit profit change in the future. Although the company may be undervalued, volatility may keep prices going down.

Right now Zynerba has 2.7 million short shares and a short percentage over float of 24 percent. Volatility remains high with this marijuana stock, as does the risk with any move. Late last year Oppenheimer noted that Zynerba was a high-risk, high-reward stock, with other experts seeing some positives and some negatives for the future of their clinical trials. Pot Stock investors should keep an eye on this one in the near term.

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