When considering stocks to invest in, there are four “back of the envelope” factors that can signal a possible investment opportunity…
- Recent Emotional Pullback or Market Overreaction
- The Price/Earnings Ratio
- A Reasonable Dividend
- Long Term Market Trends and Potential
On their own, any one of these four factors may not be compelling enough to make you want to invest in a stock… But a stock that has all of these factors happening together may warrant a second look.
Marijuana Stock Investing Analysis Example
One example of a company that has these four factors at the moment is Scott’s Miracle-Gro (NYSE: SMG).
Scott’s Miracle Grow is a lawn care and garden products company.
Here’s the description from Yahoo Finance:
The Scotts Miracle-Gro Company manufactures, markets, and sells consumer lawn and garden products. The company operates through three segments:
- U.S. Consumer
It offers lawn care products, including lawn fertilizers, grass seed products, spreaders, other durable products, and outdoor cleaners, as well as lawn-related weed, pest, and disease control products.
The company also provides gardening and landscape products, such as water soluble and continuous-release plant foods, potting mixes and garden soils, mulch and decorative groundcover products, plant-related pest and disease control products, organic garden products, and live goods and seeding solutions. In addition, it offers hydroponic products that help users grow plants, flowers, and vegetables in an indoor or urban environment; and insect control products, rodent control products, and weed control products for home areas.
The company offers its products under the Scotts, Turf Builder, EZ Seed, LiquaFeed, Water Smart, PatchMaster, GrubEx, EdgeGuard, Snap, Handy Green II, Scotts OxiCleanTM3, Miracle-Gro, Osmocote, Hyponex, Earthgro, SuperSoil, Ortho, Nature Scape, Miracle-Gro Organic Choice, Nature’s Care, Whitney Farms, EcoScraps, Gro-ables, General Hydroponics, Gavita, AeroGarden, Botanicare, Vermicrop, Agrolux, Can-Filters, Fafard, Ortho, Tomcat, Roundup, and Groundclear brand names.
It serves home centers, mass merchandisers, warehouse clubs, large hardware chains, independent hardware stores, nurseries, garden centers, food and drug stores, and indoor gardening and hydroponic distributors and retailers through a direct sales force, and network of brokers and distributors. The Scotts Miracle-Gro Company was founded in 1868 and is headquartered in Marysville, Ohio.
Scott’s Miracle-Gro Marijuana Business
So, SMG is a consumer focused lawn and garden care company… But it also has a marijuana industry focused subsidiary.
I am not a supporter of legalized marijuana, because I expect that over time the market will evolve to resemble the alcoholic beverage industry – heavily marketed as fun and acceptable to children and adults by a corporate oligopoly… Most kids and adults are not equipped to fend off this powerful corporate marketing artillery… So they make bad choices and those compound and then we end up with drug and increased amounts of drug and alcohol dependency.
That said, I think very little can be done to stop this trend and so it will probably continue.
So, the question becomes, should you look at SMG from a stock investing standpoint?
What you can you do is take a look and decide if it’s a smart investment… And if so maybe you can do some good, either locally or globally, with the profits.
Because I don’t support legalized marijuana I’ve never bought any marijuana based investments… But this one is interesting because of the four factors that I mention above.
1) Take a look at SMG’s chart and you can see that it has recently undergone a massive pullback in the stock price.
2) Its P/E ratio is around 18 which is very reasonable for the stock market today.
3) SMG has a roughly 2.5% dividend, which pays you for owning the stock, which is always nice.
4) As more states legalize marijuana for medical and/or recreational use, SMG has long term potential to profit from the expansion of this market.
Overall, it appears to be an interesting investment – and one with a story that I have just outlined.
Indeed, having a story you can tell yourself about an investment is part of the fun of it.
I do not own SMG at this time, and you should do your own research and analysis before deciding on what you think for yourself.
But on the face of it, SMG stock has the aforementioned four factors going for it.