PSIL - Watch these psychedelic stocks as sector faces year of 'collapse and consolidation'

2023-07-15 18:06:24 ET

Psychedelic stocks have taken it on the chin lately, with equity prices way down.

Investors will have to be nimble and focus on individual stock picking, according to analyst Alex Carchidi.

Speaking on Seeking Alpha's Investing Experts podcast, Carchidi said "the story of the next year, is going to be collapse and consolidation."

"I wish I had a more positive message, but I think there's going to be some hard choices made about who has pipeline projects that can make it at some point in the next few years," he said. "Who has the money to actually do it, and who doesn't -- who didn't quite meet the threshold to continue."

"It's a little bit grim, I have to say."

Carchidi isn't a fan of ETFs like the AdvisorShares Psychedelics ETFs ( PSIL ) for the sector in this environment. But he doesn't recommend picking just one stock.

ETFs are "going to include companies that are not the leaders by virtue of needing to include something other than just small handful of leaders," he said. "And that means that they're going to be invested in a lot of downwardly mobile stocks, so to speak."

"Make a few small bets on the best companies," he added. "And for me, it's still the same group. It's still, more or less in order, Compass ( NASDAQ: CMPS ), Atai ( NASDAQ: ATAI ), Cybin ( NYSE: CYBN )."

Listen to the full podcast and read the transcript for much greater detail and insight.

Carchidi said CMPS could "have a functioning therapy product in hand, proven in clinical trials in the next couple of years even."

"They're going to create this psychedelic therapy that is perhaps not what everyone dreamed of, but certainly will tick all the boxes of what a good therapy would be, and what an effective one would be," he said.

Atai has completed Phase 1 for a "nonbenzodiazepine anxiety reducing medicine, which could be gargantuan."

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