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- California’s single regulator for cannabis has submitted draft regulations.
- Health Canada added 6 new licenses, bringing the total to 761.
- 420 investor model portfolios are up 19.8-46.9% year-to-date, while the Global Cannabis Stock Index is up 6.5%.
California’s new unified regulator has submitted draft regulations
Health Canada added 6 licenses, leaving the total at 761, including 8 that are expired, revoked, or suspended.
Over the week, I shared these insights with subscribers of 420 Investor:
- Composition of the model portfolio 09.03.21
- Review of the Cannabis Subsector – 03/09/21
- This leading MSO has seen its premium decline
- Fire & Flower financial results preview for the second quarter
Here are some of this week’s highlights for 420 names on the Investor Focus List:
- CCHWF started selling flowers in Virginia
- CGC CEO Klein announced at a conference that the second quarter of the financial year could be below the previous year and significantly below expectations
- CRLBF is the nation’s leading cannabis brand, according to the BDSA, and ranks first in Illinois and Pennsylvania
- CURLF shareholders have approved an amendment to the company’s articles of association that will allow the executive chairman to retain voting rights
- PLNHF has opened a shop for merchandise, stitched & stuff, in its Las Vegas superstore
- TLRY shareholders approved a resolution to increase the authorized number of shares from 743 million to 990 million.
- VLNCF has signed a contract with Epsilon Healthcare in Australia to achieve GMP manufacturing that allows access to global markets in Latin America, Europe, the UK and Asia Pacific. It will manufacture and distribute CBD oil for Fire & Flower
- VRNOF saw an accumulation of insider buying, mostly from its CEO
The Global Cannabis Stock Index extended the seven-month correction to new lows, falling 7.4% to 47.29:
The index, which lost 34.1% in 2019 and 54.9% in 2018, after gaining 91.8% in 2017 and 88.8% in 2016, rose 5.2% in 2020. In 2021 it has increased by 6.5% so far. It currently includes 44 stocks and ended 2020 at 44.39:
420 Investor offers three model portfolios for subscribers, including two that are long-term and fully invested with the aim of beating the Global Cannabis Stock Index, 420 Opportunity and 420 Quality. 420 Opportunity ended the week valued at $ 1,136,319, down 7.3%. The model portfolio rose 29.4% in 2021, gained 35.6% in 2020 and is up 172.6% since April 2014, despite the index’s huge loss since then. 420 Quality ended the week at $ 193,402, down 7.1% for the week and is now up 19.8% in 2021 after gaining 42.8% in 2020. Launched in March 2017, the model is aimed at long-term investors in leading, low-turnover cannabis stocks and has gained 286.8% since inception, compared to the index’s 41.5% decline since then. Flying High, which is focused on swing trades, ended the week at $ 370,761, down 9.9%. The model portfolio grew 52.7% in 2020 and 46.9% in 2021, and the return since inception in late 2013 is 3608%.
After a strong rally in early 2019, the cannabis sector saw a sharp decline to unprecedented levels over the next year due to several negative developments including the CannTrust scam, Bruce Linton’s surprise termination as CEO of Canopy Growth, a disappointing introduction of legalization in Canada, regulatory confusion in the US over CBD and a slow roll-out of legalization in California, the vaping crisis and then financial turmoil and market disruption due to the COVID-19 pandemic. The sector saw the capital available to fund expansion dried up, a situation that continues to pose major challenges for companies with negative cash flow as availability is limited to stronger operators.
Overreacted, cannabis stocks bottomed in March 2020, benefiting from a perception that the industry has strong growth prospects, which was not clear at the time. One big change was that the pandemic led many regulators to allow previously banned types of retail activities such as roadside pickup and delivery. The legal market quickly benefited from the fact that the ability to order online made it even more convenient than the illegal market. States and communities have sought to expand adult use and medical access. Access to capital improved dramatically, and the leading companies began to generate large and rapidly growing sales and profits.
The strong end of 2020 continued through 2021 after the Democrats took control of the Senate in early January, but stocks overtook themselves and have been consolidating since then. Aside from concerns that state legalization will take longer than many expected, there have been some tough comparisons with last year’s sales. While several institutions took up the sector earlier in the year, the additional interest has waned.
There are several potential catalysts ahead of us, including the FDA (or Congress) clarifying CBD regulation, advances in Canadian legalization, which began in October 2018 and spanning a wider range of products, and continued growth in German and Israeli MMJ and other international markets that have developed slowly. The adult implementations for adult use in California and Massachusetts have been slow to adopt, but are gradually showing great improvements. Michigan and Illinois were legalized for adult use in late 2019, and these markets are showing strong growth that could encourage other states to legalize. Voters in Arizona, Montana, South Dakota, and New Jersey all cleared adult use legalization in November, and Connecticut, New Mexico, New York, and Virginia passed legalization through legislative process in 2021.
The big issues that lie ahead are likely to be continued cross-industry investment in the sector and greater consolidation in Canada and the US, potential federal regulatory reform (SAFE Banking Act and other broader laws that abolish 280E taxation and the Trading at higher prices) exchanges for MSOs, as well as the widespread use of credit cards for cannabis purchases), steps to enable cannabis research, the introduction of MMJ in Germany, Mexico and Australia, and further advances in South America and possible legalization of adult use in Israel and Mexico, new legal cannabis implementations in AZ, MT, NJ and SD and MMJ implementations in AL, WV and VA, possible legalization by lawmakers in DE, FL, MD, MN, NH, PA and RI and implementation of the CT, NM, NY, and VT commercial programs in 2022 and VA in 2024.
After bottoming out in March 2020, the cannabis sector is in a new bull market. Many companies have substantial sales, some even make a profit, and the liquidity is much better. The sector has moved from many old penny stocks that never proved they had a profitable business to better capitalized companies, many of which have strong management teams and big business. The investor base has also changed and is becoming increasingly institutional.
Alan is based in Houston and leverages his experience as the founder of the online community 420 Investor, the first and still largest due diligence platform focused on publicly traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and enable its sustainable growth. At New Cannabis Ventures he is responsible for content development and strategic alliances. Before Alan, who started his career on Wall Street in 1986, switched his focus to the cannabis industry, he worked as an independent research analyst after over two decades in research and portfolio management. A prolific writer with over 650 articles published on Seeking Alpha since 2007, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source for the media including the NY Times, the Wall Street Journal, Fox Business , and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | E-mail
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In this article:
Canopy Growth, CCHW, CCHWF, CGC, cl, Columbia Care, Cresco Labs, CRLBF, cura, Curaleaf, curlf, Planet 13, Planet 13 Holdings, PLNHF, PLTH, Tilray, TLRY, Valens, verano, Verano Holdings, vlncf, vlns , VRNO, vrnof, WEED