The Horrible, Awful, Very Bad Story of Canopy Growth Corporation

Long-time readers of my blog have likely noticed my deep-seated hatred for Canopy Growth Corporation (CGC), home to some of the biggest investing mistakes and best discipline lessons in the entire portfolio. I initially bought CGC at $295.30 in 2018, rode it all the way up to $550+ twice, took all of my capital out the second time, and had what would have been a winning lottery ticket on the legalization of cannabis.

… until I added investment capital back into it all the way on its crash down to $3.46.

As a result, I implemented a new rule: 

Never, ever turn a winner into a loser.

In other words, once I take all of the investment capital out of a sizable position, I can no longer put capital back in, only profits. No matter how much confidence I have in a long-term investment, discipline must trump conviction.

Some readers have asked why I don’t just cut my losses on Canopy. There are a few reasons for this:

1. At 0.354% of the portfolio, Canopy’s so small that cutting losses wouldn’t be worth it.
2. The portfolio is currently 46%+ cash. I don’t need to sell Canopy to raise funds.
3. There’s always a possibility, no matter how infinitesimal, that Canopy actually recovers one day. 

As crazy as this sounds, I never cut losses. 

Every time I have cut losses – every single time – the underlying investment rockets to the moon after I do so. As a result, I’ve learned that, for me, missing out on a huge gain is much, much more painful than taking a controlled loss.

I manage risk by never putting more money into a single investment than I’m willing to lose entirely. I deeply research the investment. I know its fundamentals. I know its technicals. I know its long-term business narrative and thesis, and I believe in it.

As a result, I make a buying plan for every asset all the way down to zero.

And, when I make mistakes like I did in Canopy, I learn from those mistakes and implement new rules to my discipline to ensure I never make the same mistake twice.

As for Canopy Growth, this week, I am no longer allowing it to occupy a full allocation in my portfolio and have rolled it into the Old-Spec Basket. By doing this, I freed up an allocation to assign to the new Artificial Intelligence Basket (see below).

Just a little housekeeping… and a rant.

Introducing the A.I. Basket

There’s no question that Artificial Intelligence (A.I.) will have an immense and profound impact on society and the world as we head into the future. Accordingly, I wanted to have more funds to allocate specifically to A.I.-related stocks.

Granted, Nvidia (NVDA) is the biggest position in my portfolio and will maintain its own full allocation status, but this basket will accommodate the other A.I. plays I want to make that I don’t feel quite so confident about to have entire positions.

Additionally, doing this will increase the size of the Old-Spec and New-Spec baskets, too, so all stocks in these baskets will be able to grow a bit more.

A.I. Basket: Arm Holdings (ARM), Alphabet (GOOGL), Meta (META), Roblox (RBLX) and Snowflake (SNOW) new position added this week – see below.

Old-Spec Basket: Amazon (AMZN), Berkshire-Hathaway (BRK.B), Canopy Growth (CGC), Salesforce (CRM), Skyworks Solutions (SWKS), and Take Two Interactive (TTWO). 

New-Spec Basket: Coinbase (COIN), Dutch Bros (BROS), Rivian (RIVN), Shopify (SHOP) new position added this week – see below, and Twilio (TWLO). 

Shopify (SHOP): *New Position*

I opened a new position in Shopify (SHOP) on Monday before it reported earnings on Tuesday morning. Shopify (SHOP) is an e-commerce platform responsible for empowering small businesses (as well as medium and large businesses) globally to build an online presence and thrive selling their products internationally. Not to mention, Shopify is also Canadian, and everyone knows we have to stick together. Since I’m not quite ready to make Shopify its own allocation in the portfolio, I’m rolling it into the New-Spec Basket.

I opened my position with a 30.79% allocation at $91.00. I started smaller than I’d prefer, but that’s simply because I want to wait until after Shopify reports earnings. Regardless of whether earnings are good or bad, I will add more to the position.

It was a good thing, too, because although Shopify beat earnings revenue, they gave foggy forward guidance, causing the stock to sell off more than 10% on Tuesday and triggering my next buy order which filled at $78.60, adding 13.00% to the position.

The second buy lowered my per-share cost -3.41% from $91.00 to $87.90. From here, my next buy target is $71.15, slightly above a point of support SHOP has tested a few times already in 2024, and my next sell target is $175.80, slightly under Shopify’s all-time high set back in 2021.

SHOP closed the week at $81.29, down -7.52% from my cost basis.

Snowflake (SNOW): *New Position*

I opened a new position in Snowflake (SNOW) on Monday. Snowflake offers artificial intelligence services to clients who can choose to “pay-as-they-go” meaning they only pay for what they need instead of paying for an entire contract they may not use. As a result, Snowflake has become incredibly popular.

I’ve been eyeing Snowflake for some time and decided to open a position even after its recent rally simply because I have far too much cash. However, I’m not ready to make Snowflake its own allocation, so it shares a spot in the A.I. Basket.

I opened my position buying 26.28% of my allocation at $231.00 with the intent of adding more after Snowflake reports earnings on Wednesday, February 28, regardless of which direction it heads. From here, my tentative next buy target is $209.00, but, as I said, I will be adding to this position regardless after earnings next week. I have no sell targets for this position at this time as it is simply too new to tell how far it has to go.

SNOW closed the week at $230.22, down -0.34% from where I started it.