Some Problems Require Crazy Solutions!
I just bought stock in MindMed. Here’s why…
It’s one of the world’s biggest problems. And neither science nor politics offers any real solutions … yet.
I’m talking about addiction.
In the States, drug overdoses, mainly driven by opioid addiction, caused over 100,000 deaths in just one year.
It’s not a problem law enforcement can fix. They’re doing what they can, but the problem is only getting worse.
A report released by the International Assoc. Of Chiefs of Police acknowledges this reality. They wrote, “police alone cannot solve the problem of addiction.”
At this point, all options should be on the table. Even if it’s coming from an unlikely source. And some scientists believe psychedelics could provide the solution.
That means, using drugs to treat drug addiction.
It sounds crazy, right? Maybe it will work … maybe it won’t. In my opinion, it’s worth trying.
A friend of mine works in healthcare in Oregon, the state at the forefront of the legal medicinal use of psychedelics. A few months ago, he told me the trend is gaining steam among the medical community.
That was in January, the markets were in the toilet, so I wasn’t looking to invest in anything at the moment. I tucked his comment into the back of my brain.
As the markets begin to turn I’m scouting for opportunities.
And psychedelic drug research is getting noticed…
Follow The Money!
Venture capitalists (VCs) have taken note of the trippy trend.
According to a Fast Company report, VC firms have poured hundreds of millions of dollars into the psychedelics-based mental health space.
I’m not going to sort out the science for myself. I’m not a doctor.
Plus the odds of a drug going through all the clinical trials and getting approved by the FDA are long. About 1 out of every 5000 compounds that enter into the testing phase ultimately receives final approval.
But I am a trader. And I can recognize a potential hot trend when I see one.
There are quite a few publicly traded companies with exposure to medicinal psychedelics
Mind Medicine (MindMed) Inc. (NASDAQ: MNMD) is one of the best-known.
Here’s a list of others the others I’m aware of:
- ATAI Life Sciences (NASDAQ: ATAI)
- GH Research PLC (NASDAQ: GHRS)
- Compass Pathways PLC (NASDAQ: CMPS)
- Cybin Inc. (NYSE: CYBN)
- Seelos Therapeutics Inc. (NASDAQ: SEEL)
- Field Trip Health Ltd. (NASDAQ: FTRP)
I’ve selected MindMed because of who already owns the stock and its interaction with the $1 price level.
The Case for MindMed
At writing, about 17% of all shares are held by insiders. They have a direct stake in their company’s success. I like that.
And a fair amount of shares, 13%, are held by institutions … Blackrock is the top investor with 17+ million shares, about 4% of the company. It’s a $24 million position.
Then there’s the chart…
It’s pretty beat up, down from all-time highs near $6 last year.
The price has flirted with $1 all year. And despite the volatility in the overall market, the price has remained above $1. It’s clearly a support level.
Now the chart shows a triple bottom. Possibly a bullish reversal.
Buyers keep pushing the price back above $1. Which could indicate a strong desire to avoid a reverse split (those are typically bearish).
The company has a drug in phase one trials that could provide a “solution for addiction.”
For me, this sector has more than enough potential to explode based on speculation alone.
And the stock has enough going for it that a small investment is worth the risk to me.
Managing The Risk
I consider this a high-risk trade, so I’m limiting my exposure to 5% of my portfolio.
$1 could serve as a stop, but I’m not looking to get shaken out by a random off-day.
So for this trade, I have no hard stop. A decline of more than 30% will make me rethink the position. My hold time is approximately 2-3 years.
Congress is already considering legalizing cannabis.
And in 2023 Oregon is scheduled to widely legalize psychedelics.
Much like the weed craze of 2018, we could see a huge spike in psychedelic stocks in 2023 or 2024.
I’m not waiting around. I’d rather get in now before any good news hits.
If phase one trials return positive results, watch for a spike in the stock price.
I’m looking to take profits into any big spike. A solid press release or just some good sector momentum could send the price to all-time highs above $6.
My profit-taking plan is as follows:
- 50% at $2.40
- 25% at $5.50 (with trailing stop)
- 25% at $50+ (with trailing stop)
As always, please remember trading is risky. And nothing I say or do should ever be considered a buy or sell recommendation.
I’m investing in the company and taking a calculated risk.
Happy trading!