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The Mushrooming Opportunity in Psilocybin Stocks!
Psilocybin, which is the active ingredient in magic mushrooms, is emerging as a promising mental health treatment. But will mind expansion lead to wallet expansion for you?
Hello, and welcome to another edition of Investing Intel from the team at ValueTheMarkets! As always, the newsletter is packed with stock picks and investing insights we think you’ll enjoy, including:
👉 Three stock tips
👉 Investing signals
👉 Fear & Greed analysis
👉 Key dates for your diary
👉 Investment strategy insights
We’ve got magic mushrooms on our minds this week. No, it’s not because we’re trying to revive the summer of love nearly 60 years on. Instead, it’s because we’ve been examining the investment opportunities associated with psilocybin, the active ingredient of these psychedelic fungi.
It might sound unconventional, but if you read on you’ll find out that psilocybin treatments for mental health problems have been generating a huge amount of excitement over the past couple of years. As such, clinical studies and psilocybin companies have been springing up like… well, mushrooms.
We’ve picked out three psilocybin stocks we like the look of, as well as examining why the industry might be a fantastic place to look for some explosive returns. Keep scrolling to find out more…
The One with Credentials - ATAI Life Sciences (NASDAQ: ATAI)
ATAI’s decentralized model sees it partner with various companies that specialize in developing treatments for specific mental health conditions. This diversified approach can potentially reduce risk and increase the likelihood of bringing successful treatments to market.
The company also has a broad development pipeline with over 10 therapeutic programs targeting a range of mental health conditions. As well as therapies based on psychedelic substances like psilocybin, some use non-psychedelic compounds. The breadth of this pipeline could offer multiple potential pathways to revenue.
High-profile backers are another positive here. ATAI has attracted significant investment from the likes of Peter Thiel. This provides not only funding but also a validation of the company's strategy and potential.
Further validation stems from ATAI’s collaboration with Japanese pharma giant Otsuka, which represents a rare collaboration between a psychedelic-focused business and a bonafide pharmaceutical player.
Some current treatments for major problems like depression and addiction are inadequate. If ATAI's therapies prove successful, they could help fill this gap and be highly sought after.
The Expander - Cybin, Inc (NYSEAMERICAN: CYBN)
Cybin is among a small group of companies leading the charge in researching and developing psychedelic therapeutics. The growing acceptance and decriminalization of certain psychedelics could position Cybin to capitalize on a burgeoning market.
The business benefits from a diverse pipeline of novel molecules in various stages of pre-clinical and clinical trials.
Cybin is also developing new drug delivery methods intended to improve the safety and efficacy of psychedelic therapies. These innovations could give the company an edge in a competitive market.
With growing awareness and concern about mental health disorders globally, it is particularly notable that many current treatments often have limited efficacy and severe side effects. Cybin's focus on creating therapies with fewer side effects and better efficacy could meet this unmet need in the market.
The business has been active in making acquisitions and collaborating with other companies to expand its drug portfolio and technological capabilities. This aggressive growth strategy could yield significant future benefits.
The Hype Stock - COMPASS Pathways (NASDAQ: CMPS)
Compass is at the forefront of developing psilocybin-based therapies. Its main treatment, COMP360, is in phase IIb trials for treatment-resistant depression, putting it in a potential leadership position in this emerging field.
The business had positive results from its phase IIb clinical trial of COMP360. If the trial's positive results continue into phase III, it could bring Compass Pathways closer to having an approved product on the market.
Compass Pathways has a strong management team with extensive experience in the biotech and pharmaceutical industries. The company also has the financial backing of notable investors, providing the resources needed to continue its research and development activities.
The stock is heavily backed by Wall Street analysts, with the average of analyst coverage pointing to a share price explosion of more than 400% over the next 12 months. It’s a lot to live up to, but the business is generating a lot of excitement!
So, we’ve picked out some shroomy stocks, but what about the industry at large? Can we expect a shroom boom shortly?
First, let's look at the legal side of things.
At present, psilocybin remains illegal at the federal level in the US. However, therapeutic use has been approved in states like Colorado and Oregon, spurring excitement that widespread decriminalization and legalization could be close on the horizon.
Could we see a wave of new acceptance similar to that which has brought about the growing legal cannabis market?
Next, there’s the clinical aspect. According to the US National Library of Medicine, there are more than 140 ongoing trials involving treatments using psilocybin. According to psychedelics expert David Nichols from Purdue University School of Pharmacy, this number would have been zero just five years ago.
It’s clear, therefore, that drug development companies think they are on to something when it comes to using psilocybin as a treatment for mental health. Speaking to the American Society for Microbiology, Nichols noted that the speed and efficacy of psilocybin is a major part of what makes the compound attractive for treatment.
There’s a huge addressable market too.
John Hopkins Medicine estimates that, in a given year, as many as 26% of American adults suffer from a diagnosable mental health disorder. Meanwhile, the Centre for Disease Control says roughly one in 25 Americans live with serious mental illness, such as schizophrenia, bipolar disorder, or major depression.
That’s a huge amount of people who could benefit from ground-breaking mental health treatments and improvements.
As such, it's maybe no surprise that the psychedelic drugs market is expected to grow to $6.4bn by 2029 with a compound annual growth rate of more than 13% from 2021, according to figures from Data Bridge Market Research.
In short, it appears that the psilocybin space carries some serious potential for payoff over the next decade, but it might be a high-risk space for investors to dip their toes into.
Of course, we’ve also got to take a look at the current batch of trending stocks. This week, we’re picking apart the top searched stocks online from the last seven days:
Joby Aviation Inc (NYSE: JOBY)
Walgreens Boots Alliance (NASDAQ: WBA)
Eli Lilly & Co (NYSE: LLY)
Snowflake Inc (NYSE: SNOW)
XPeng Inc (NYSE: XPEV)
Joby Aviation is at the top of the pile after its share price soared last week by more than 60%. The take-off in share price came after US aviation regulators approved the company’s application to begin testing its electronic air taxi technology. Flying cars – here we come!
Pharmacy retailer Walgreens has been generating chatter for slightly less positive reasons. The chain announced last week that it intends to close around 450 locations in the US and UK as earnings dipped on last year’s performance.
Staying with the pharmacy theme, drugmaker Eli Lilly has been touting the testing success of its Triple G weight loss treatment, which it says resulted in weight loss of almost 25% across 48 weeks. Is this a diet pill that works?
It might be the height of summer, but Snowflake is still managing to trend after the cloud data company launched a new partnership with red-hot chipmaker NVIDIA. Investors appear to be optimistic that Snowflake has a strong chance of cracking the AI nut with this new pairing.
Finally, Chinese EV manufacturer XPeng rounds off our list after its second-quarter vehicle deliveries returned to growth and beat the company’s own expectations. It’s news that has supercharged the company’s share price, which is up by more than 40% over the last seven days.
Fear & Greed
The Fear and Greed Index is a measure of stock market sentiment calculated by CNN Business using seven measures, including market momentum, market volatility, and safe haven demand. It’s meant to shed light on the emotions currently driving the market, giving you insight into how traders are making decisions. Remember, traders are humans, not robots.
Extreme Greed. That’s where we’re at right now according to the Fear & Greed Index. We’ve arrived here after a week of strong share price momentum and stock price strength, while junk bond demand is down in the toilet. This high momentum follows the NASDAQ’s best H1 in four decades, buoyed by the bounce-back of mega cap tech giants.
Does that mean we could see sentiment shift in H2 and see the market correct? Some analysts certainly seem to think so.
Greg Davis, managing director and chief investment officer at Vanguard was quoted by the Financial Times as stating: “If you believe that the Fed will be successful in slowing the economy down, it’s hard to justify where the equity market is. Right now, something is a bit out of whack.”
Either way, inflation is a keyword heading into the second half of the year, and keen investors will want to keep their eye on the waning possibility of recession over the next few months.
Dates in the Diary
Monday 3rd – US ISM Manufacturing PMI (Jun) / US Construction Spending (May) / China Caixin Manufacturing PMI (Jun)
Tuesday 4th – US and Canadian Markets Closed for Independence Day / German Balance of Trade (May)
Wednesday 5th – US FOMC Minutes / US Factory Orders (May) / Eurozone PPI (May)
Thursday 6th – US Balance of Trade (May) / US ISM Services PMI (Jun) / US Job Openings (May) / Eurozone Retail Sales (May)
Friday 7th – US Non-Farm Payrolls (Jun) / US Unemployment Rate (Jun) / Canadian Unemployment Rate (Jun)
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Investing Strategy Ideas: SRI
Sometimes, it’s nice to be nice.
That’s the basic rationale behind socially responsible investing (SRI). It’s a strategy which sees investors backing companies that align with ethical, social, or environmental criteria. These criteria can vary from investor to investor, with some maybe eschewing
Investors might determine how to fill their portfolio through negative screening, which involves eliminating companies or investment vehicles based on their actions. This might mean avoiding arms manufacturers or steering clear of businesses they deem to be harmful to the environment.
On the other hand, some investors will use positive screening to decide which stocks to back. They might decide to build a portfolio of companies which have strongly contributed to social justice efforts or renewable energy.
There are other ways to engage in socially responsible investing too. For example, an investor might back a company so they can use their voting rights or position of influence to try to steer it in a positive direction. This is known as shareholder advocacy.
There are exchange-traded funds (ETFs) which might appeal to socially responsible investors too, with these including the iShares Global Clean Energy UCITS ETF and the Nuveen ESG Dividend ETF.
In short, there are lots of ways to make sure your money is making the world a better place!
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Until Next Time!
Many thanks for taking the time to read Investing Intel today. We hope you’ve enjoyed our insights and are looking forward to more in the week ahead.
Have a good week and a great Independence Day!
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