At the height of the Reddit-fueled frenzy surrounding GameStop (NYSE: GME), upstart online brokerage Robinhood halted and then limited the buying of GameStop shares.
This caused the meteoric rise in the share price to come to a crashing halt. Robinhood users were furious at what they perceived as the brokerage protecting the interests of large hedge funds betting against GameStop.
The actual cause of the halt, according to Robinhood, was that the company didn’t have the funds to place the large number of orders coming in for GameStop.
After the air went out of the GameStop rally, investors turned their attention to other companies, including cannabis companies. With all the news in recent weeks of legalization advances in various states, Robinhood users piled into the only cannabis companies available to them: Canadian Licensed Producers (LPs). Despite not being affected in the slightest, LP’s like Aphria (TSX: APHA) (NYSE: APHA) (FRA: 10E), Tilray (NASDAQ: TLRY) (FRA: 2HQ) and Sundial Growers (NASDAQ: SNDL) (FRA: 14K) saw a massive influx of new investors.
The true beneficiaries of advancing legalization in America are U.S. Multi-State Operators (MSOs), who, in addition to their Canadian Securities Exchange (CSE) listings, all trade on the OTC Markets Exchange (OTC) in the United States. Unfortunately, at the moment, U.S. OTC stocks are still not unavailable for trading through the Robinhood app.
Industry-leading MSOs such as Curaleaf (CSE: CURA) (OTCQX: CURLF), Trulieve (CSE: TRUL) (OTCQX: TCNNF) and surging newcomer Red White & Bloom (CSE: RWB) (OTCQX: RWBYF) are unavailable (and largely unknown) to Robinhood investors. Red White & Bloom, which arguably could be the multi-state operator that currently offers investors the most upside, burst onto the MSO scene last year. In 2021, the company’s stock has exploded higher, with RWB’s highly anticipated Q4 earnings right around the corner.
With legalization showing no signs of slowing down, the future looks quite green for U.S. MSO’s. Any U.S. investor leaving Robinhood over the Gamestop fiasco and looking to invest in U.S. cannabis stocks, such as Red White & Bloom, Curaleaf and Trulieve, should strongly consider the following brokerages, all of which offer access to OTC stocks.
Brokerages for U.S. Investors 🇺🇸
Considered by many to the best all-around brokerage, Fidelity is well suited for both the beginner and veteran, the trader and the long-term investor. Its ease of use, deep educational tools, extensive market/industry analysis, affordable fees and the ability to buy just about any stock, bond, ETF or mutual fund in the world make Fidelity the gold standard for the industry. What makes Fidelity a prime candidate for those looking to invest in OTC stocks is that it does not charge a commission when trading these stocks.
Other than a customer service queue that can be extensive, perhaps the only knock against Fidelity is that it doesn’t specialize in any area; despite being great at almost everything, it’s not really excellent in any one area.
Fidelity | StockBroker.com | Rank 2nd – Overall Rating: ⭐️ ⭐️ ⭐️ ⭐️ ⭐️
Best known for its Think or Swim platform, TD Ameritrade is one of the country’s largest brokerages. Their industry-leading educational tools allow companies to dive deep into various aspects of the market. Think or Swim allows investors to build portfolios using fake money, create advanced charts using various data metrics and plan intricate options plays.
The one area where TD Ameritrade falls short is it charges a fee ($6.95) to buy OTC stocks. As a flat fee, it might matter very little to investors buying thousands of dollars worth of stock at a time. However, for smaller investors, that fee might comprise a substantial portion of the investment, severely affecting returns.
TD Ameritrade | StockBroker.com | Rank 1st – Overall Rating: ⭐️ ⭐️ ⭐️ ⭐️ ⭐️
Best known for its commercials involving a baby discussing stock trades, E-Trade is one of the country’s largest and recognized brokerages. The online brokerage offers almost everything that other large brokerages do, but where they truly shine is options trading. While most brokerages nowadays offer commission-free options trading (thanks, Robinhood), most still charge a $0.65 flat fee per options contract. E-Trade caters to frequent traders by reducing this fee to $0.50 for investors placing 30 or more trades per quarter.
E-Trade does not seem to have as robust an educational platform as Fidelity or TD Ameritrade, and their website can sometimes be difficult to navigate. The addition of that pesky $6.95 OTC fee makes E-Trade primarily geared toward options investors.
Brokerages for Canadian Investors 🇨🇦
Wealthsimple is basically the Canadian version of Robinhood; it’s geared toward younger and inexperienced investors. Benefits include commission-free trades of stocks & ETF’s and a streamlined, easy-to-use interface. The company also offers managed accounts where investors can work with professionals to build a portfolio of various ETFs.
With their focus on the casual investor, Wealthsimple does not have some of the larger brokerages’ deeper analytical tools. The company is also substantially smaller than other brokerages, so it could potentially run into some of the same funding issues as Robinhood faced.
Wealth Simple Trade | GreedyRates.ca | Overall Rating: ⭐️ ⭐️ ⭐️ ⭐️ ⭐️
Most of the tools that Interactive Brokers offers are primarily geared toward professional investors, including advanced charting tools, stock screeners and custom portfolio building. However, the company offers commission-free trading on U.S. stocks and ETF’s, with an attractive fee of $0.01 per share traded.
As a service geared toward professionals, the user interface can be confusing for inexperienced investors to navigate. Also, the fee structure is not conducive to buying large share lots, as is often the case when buying penny stocks. Since some of the U.S. cannabis stocks have such low stock prices, Interactive Brokers is best suited for those looking to focus on investing in the largest companies.
Questrade is a traditional brokerage, offering a variety of both self-directed and managed accounts. Investors have access to both Canadian and U.S. cannabis companies via individual stocks, ETF’s and mutual funds. There are also a variety of educational tools available for new investors. The fees for a managed account start at a reasonable 0.25%.
Like virtually all Canadian brokerages, Questrade charges a fee ($4.95-$9.95) to trade individual stocks. This is a significant fee for smaller investors but not so much for those with larger portfolios. Fortunately, trading ETFs is commission-free, so there are options for investors at all income levels.
Investors have the opportunity to take part in a once-in-a-generation investment opportunity in the U.S. Cannabis Boom through any of the above brokers. However, which brokerage is the best for each individual investor depends largely on one’s experience and goals. Inexperienced or casual investors from the United States would be best served by Fidelity or TD Ameritrade, while Canadian investors should consider looking into Wealthsimple Trade or Questrade. E-Trade (U.S.) and Interactive Brokers (CDN) would best serve more experienced investors looking to trade options, trade high volume or perform extensive analysis.
This U.S. Cannabis Stock Appears to Be Way Undervalued and May Actually Benefit From a Second Wave of the Pandemic
Red White & Bloom is a paid client of The Cannabis Investor. The Cannabis Investor holds a position in RWB.
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