Let's face it: Many marijuana stocks stink right now. After a sizzling start to the year, cannabis stocks overall have experienced a downturn. For some of them, the pullback could create a great buying opportunity for aggressive investors. But not all marijuana stocks have declined recently. And whether they're up or down, not every marijuana stock is a great pick to buy.
Three pot stocks that I personally wouldn't touch with a 10-foot pole right now are Insys Therapeutics (NASDAQ: INSY), Namaste Technologies (NASDAQOTH: NXTTF), and Medical Marijuana (NASDAQOTH: MJNA). Here's why these stocks get a thumbs-down in my view.
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1. Insys Therapeutics
When a company warns that it might not have enough money to keep the lights on, that's a pretty good signal that you might want to stay away from its stock. And that's exactly the warning that Insys Therapeutics gave last month. As you might expect, its stock plummeted on the news.
Insys' problems stem primarily from sinking sales of its opioid drug Subsys. The company wants to sell Subsys as part of its transformation to a cannabinoid-focused biotech. So far, though, there are no buyers.
The biotech's board of directors replaced Saeed Motahari with Andrew Long as CEO in April. Long had previously served as Insys' CFO. He has a tough job ahead of him. Insys might not even have enough money to meet demands from the U.S. Department of Justice (DOJ) related to a settlement agreement over allegations of improper marketing practices of Subsys in the past.
At one point, I thought that Insys perhaps had a decent shot at turning things around. But I changed my tune over a year ago and am still skeptical about the beleaguered biotech's prospects.
2. Namaste Technologies
Namaste Technologies is a marijuana stock that's actually performing quite well right now. It was the best marijuana stock in May with a gain of 16%. But this recent surge isn't enough to make me bullish about Namaste.
The company was targeted by noted short-seller Citron Research in October 2018. Citron alleged that then-CEO Sean Dollinger lied to investors about Namaste shares being accepted for listing on the Nasdaq stock exchange. It also alleged that Dollinger sold its U.S. company, Dollinger Enterprises U.S., to another Namaste executive, David Hughes, and didn't disclose the insider transaction.
Namaste's board of directors appointed a special committee to investigate the allegations. That committee ultimately found that Dollinger had indeed failed to disclose the sale of the U.S. asset to Hughes. The board promptly booted Dollinger out, replacing him with Meni Morim, who had previously served as chief product officer. Namaste also made changes to its board of directors.