Gamble on Stocks

Gamble on Stocks: Compass Pathways (CMPS)

Gamble on Stocks

Medical mushrooms will be the new cannabis. As the stigma comes off cannabis, “magic” mushrooms should be poised to benefit. Just like cannabis, compounds within mushrooms have been proven to have medical benefits. Psylocibin, one of the main compounds in mushrooms, has really helped some patients overcome depression. Studies have also shown where it helps soldiers suffering from the effects of PTSD.

The FDA granted it the Breakthrough Therapy Designation which is reserved for promising therapies which can be significantly better than what is currently available. It is also less physically and mentally addictive than other mental health drugs like alprazolam [Xanax] or diazepam [Valium].

Oregon just legalized the use of medical mushrooms, while D.C. decriminalized it. It seems likely that many other states will follow as the “War on Drugs”, and the billions spent on it continues to be a failure.

In my opinion, Compass Pathways seem best positioned to capitalize on this trend. They are based in the U.K. and backed by Peter Thiel. CMPS had their IPO in September, and investors still appear to be determining what this company could be worth.

I think CMPS is a worthy gamble if you can get ahead of the ‘psychedelic investing’ trend. There should be plenty of catalysts to the upside as “magic mushrooms” make headlines for medical breakthroughs. The company also has a relatively small market cap, at $2 billion, so if it starts to break out, it could fly.

Since I like this one for the long term, and there are no long-term stock options currently available, I would buy the stock directly.

Investors may have to hold onto this one for a while to see this story play out. To the upside, I’d be looking to exit north of $100 per share. To the downside, I’d look around the IPO price of $35 before cutting my losses.

Clint and some DreamWork clients own CMPS and CMPS options.

The “Gamble on Stocks” newsletter is intended for entertainment and educational purposes only. It is based on the methodology used in the Gamble on Stocks Spector™ by DreamWork Financial Group.

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Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.