Many marijuana investors recently have been falling victim to misleading headlines. This is on top of pump-and-dump schemes and valuations divorced from reality.

My purpose in writing this column is to help investors prosper and keep them from falling victim to misleading headlines. I have been writing for a while that many people will make millions in marijuana, but many more will lose everything. If you needed additional proof of the validity of the foregoing statement, you have it in the form of marijuana-stock movements around earnings reports.

Let us first build the necessary background with the help of a chart. Please click here for an annotated chart of Canopy Growth CGC, -0.24% . Please note the following:

• The chart shows The Arora Report signal to take partial profits near the highs of the present swing. That was about $10 above the low price since then.

• Canopy Growth has performed better than other large marijuana stocks such as Aurora Cannabis ACB, +3.09% , Aphria APHA, -2.70% , Cronos CRON, +3.76% and Tilray TLRY, +5.31% . Canopy Growth is a lot more stable than less popular stocks such as The Green Organic Dutchman Holdings TGODF, -4.07% , New Age Beverages NBEV, +2.81% , MedMen MMNFF, -2.51% and Liberty Health LHSIF, -2.06% .

• Canopy Growth is the bluest of the blue-chips of marijuana stocks. The Arora Report designated this stock as the core position. It has even been added to our model portfolio, which contains legendary companies such as Apple AAPL, +2.67% Alphabet GOOG, +1.55% GOOGL, +1.59% and Walmart WMT, +0.72% .

• The technique we are using is to hold a small core position and surround it with trade-around positions. This technique can often double the returns and lower the risk.

• The chart shows The Arora Report buy signal. Subsequently the stock gained as much as 105%.

• Please take a few minutes and carefully study the chart and The Arora Report signals. The purpose is to see that a lot of money has been made by digging below the surface and really understanding companies.

Ask Arora: Nigam Arora answers your questions about investing in stocks, ETFs, bonds, gold and silver, oil and currencies. Have a question? Send it to Nigam Arora.

Misleading headlines

I am paraphrasing headlines across the media that end up misleading investors. They may be truthful, but they are misleading. Here are a few examples:

• Aurora Cannabis earnings surge 2,800%

• Aurora Cannabis earnings release — 260% revenue growth

• Aurora Cannabis stock surges after earnings report

• Aurora Cannabis continues to outperform

• Aurora Cannabis sees huge sales increase

Now let us see why all of these headlines were misleading.

• If you look at the price chart and compare Canopy Growth to Aurora Cannabis, the stock had not outperformed at the time of the headline.

• Total revenues for Aurora Cannabis rose 55% from the previous quarter and 260% from a year earlier. Those numbers seem impressive until you learn that the total revenues were a meager 29.7 million Canadian dollars (U.S. $22.4 million).

• Here is a company with a market valuation of over $5 billion, but revenues of only C$29.7 million. Does the valuation even make sense? Does it even make sense to look at the revenues?

• Aurora Cannabis reported net earnings of C$105.5 million compared to C$79.9 million in the prior quarter and C$3.6 million a year earlier. Those are impressive numbers indeed. But how does a company with C$29.7 million in revenues earn C$105.5 million? Shouldn’t you be ignoring the headlines and digging below the surface?

• The media tend to hype earnings. But the reality is that earnings were mostly for a period that did not cover Canadian legalization of marijuana. Isn’t trading based on those earnings akin to looking in the rear view mirror and ignoring what is ahead?

I have used examples of Canopy Growth and Aurora Cannabis, but the same logic applies to all marijuana stocks. To be successful in making money in marijuana stocks in the long run, investors are well-advised to ignore the headlines, dig below the surface and to make sure that they have access to reliable sources of real-time analysis.

Please also read:

How to survive marijuana stocks’ rollercoaster ride

If you buy only one marijuana stock, this should be it

Seven reasons Big Tobacco is likely to make a move on the marijuana industry

Marijuana beverages are the new thing, but investors should only take sips

Tilray is the poster boy of short-squeeze stock candidates — here’s how to find others

Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.