I'm doing something I almost never do. I'm looking at cheap speculation stocks. These are stocks that should never represent more than 0.5% of smart person's portfolio. But in a time when the broader market is facing uncertainty, I'm willing to start hunting. The stocks I mention below are too small to flow with the Dow, which means that the market dipping below 24,000 today means very little for them.
Liberty Health Sciences
Liberty Health Sciences (LHSIF) is a long term deal. The short term is murky at best. The medical marijuana company operating in Florida has had some drama due to its past affiliation with Aphria Inc (APHA) . Yes, that Canadian company that short sellers keep harping on for their expensive acquisitions; myself included, though I do own some Aphria shares. Liberty was once mainly a subsidiary of Aphria in their plans to expand into the United States. The company has licensing in Florida; a market with a massive aging population. The senior population is what drives medical marijuana in its affiliated use as a treatment for the effects of cancer therapies, glaucoma, etc. After facing criticism from the Toronto Stock Exchange over holding questionable interests in the United States relative to general policies, Aphria largely divested its holdings in LHSIF rather than risk being delisted.
I don't recommend taking a stake in the stock until we've seen whether Aphria's executives get accused of any more inflated acquisitions. LHSIF stock took a hit when news broke of Aphria's feud with short sellers. As a whole, I personally don't see Liberty Health Sciences getting too much more attention over the whole thing. To that end, the fallout on media talk made the stock cheaper. I like LHSIF as a play on what is actually legal. The medical marijuana market has been around for a while and their activities are strategically placed in what I view as the best state for it.
The company is small. Sales were a little over $600,000 Canadian dollars last year (The company is still headquartered in Toronto). That's where the growth appeal lies. In the first quarter of fiscal 2019, Liberty Health Sciences reported revenues of more than $1.14 million. In the first quarter alone, the company's revenue is already up 90% over fiscal 2018 full year results. It's not all sunshine and rainbows as the company is not profitable yet. LHSIF had a loss of $3.17 million in the first quarter. They are definitely still in the building stage. That said, I like their balance sheet. The company has over $38 million in cash/deposits on hand; with assets of $131 million. As the company seems to have done most of its financing through stock, its liabilities are low. Total shareholder's equity is $107.9 million.
Again, this is a long term play on speculative markets. There's a reason the stock sells at $0.79 a share. The draw is the ever developing market for medical marijuana for the senior population of Florida. I don't buy into the whole story about a federally legalized United States in the next 10 years. I don't buy into the idea that LHSIF will successfully expand into every "state legalized" cannabis market. What I do believe is that they're positioned perfectly for Florida's aging populace.
One of my favorite potential big gainers for the next decade is Valneva SE (INRLF) . The biotech company makes a plethora of vaccines but there's one in particular that I view as a holy grail. The company is in trials for a vaccine for Lyme disease. As a guy that enjoys the outdoors, I can say from experience that it has become increasingly difficult to do any sort of biking, running, hunting, fishing, kayaking, etc in the northeastern United States without the fear of an infected tick bite. Even the golf course isn't safe. I didn't just hear about this stock. I found it during research after getting a tick not long ago.
To answer the pending question, no. I do not own shares yet. I think there's some potential downside before the potential for gains. Valneva has many different products; producing revenues of $105.29 million (in Euros) in fiscal 2017. Revenues are up 2.6% as a whole through the first nine months of 2018 to $78.33 million, but sales hit a snag in the third quarter. Third quarter revenues fell 13.9% year over year to $19.36 million. Furthermore, the biotech firm does not make any money. They have a strong balance sheet in terms of cash, but have largely relied on stock dilution for financing. In a way, my hope is that the slowdown will drag down the share price. I want to get this one cheap. My hope is that 2019 is a weak year for the company and that I can slowly begin to accumulate shares.
Today the French company announced the initiation of its Phase 2 Clinical Study for its Lyme Disease Vaccine. If this vaccine makes it to market, Valneva may need to hire an outside marketing firm, because I don't think the name VLA15 will draw sales. Nevertheless, I love the potential. Lyme disease cases are increasing in the United States as ticks and the animals they prey on continue to spread it. The company points out that between the United States and Europe alone, 500,000 cases of infection are reported each year. That number seems likely to only increase.
I reiterate, this is not a stock for today. It's a stock for 10 years from now. Currently, Valneva is the only company with a vaccine in clinical trials. We are a long way off from seeing the payout. This Phase 2 is expected to last until the middle of 2020. After that we'll be waiting on Phase 3 and 4. It's not a clear path to success; but the results could be huge. I will be watching this stock incredibly closely over the coming years. I suspect the share price performance will be largely dependent on Valneva's ability to stabilize its earnings a bit. Yes, they're putting a lot of money into R&D, but the stock won't tolerate it without good news. If they don't create a renewed revenue story, I expect price declines. As someone that is looking at this as a play on the untouched Lyme Disease market, a declining share price wouldn't be the worst thing for those wanting to obtain cheap entry points.