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While a few other cannabis stocks slipped, most of the major industry players saw gains this week. (Aurora Cannabis Inc. (TSX:ACB) is up by 3% and Canopy Growth Corp (TSE:WEED) by 4.5%.) The sector as a whole has been on a tear in recent weeks, with the index gaining a whopping 25% over the last month. (AMMJ is up by 26.9%, HYYDF by 29.7%, and THCX by 34.2%.)
There was an abundance of news from the cannabis industry this week, and while there were some winners, many of the biggest names took it on the chin. Altogether, the cannabis stocks I cover lost 9.02%, or $131.66 per share.
Navigate the evolving cannabis industry with 420 Investor, a premium service that sends you real-time alerts and explanations of the news below and more.
- In Louisiana and Texas, there has been progress in legislation favoring cannabis.
- Retail sales of cannabis in Canada rose 74% in February.
- Health Canada has added 8 licenses, bringing the total number of licenses to 665.
- Over the past year, 420 Investor’s model portfolios have increased by 63.2% to 81.9%, while the Global Cannabis Stock Index has increased by 37.8%.
Louisiana has made some progress on a bill to legalize cannabis for adults, and Texas may improve its medical cannabis program as lawmakers consider raising the THC limit and expanding the number of medical conditions.
According to Statistics Canada, retail sales in February were 74% higher than a year ago, at C$263 million. Health Canada added 9 new licences, bringing the total number of licences to 657, including 10 expired, revoked or suspended licences. It has released figures for December showing that stocks of dried flowers were over 1,100 tonnes, far in excess of consumption levels.
I shared this information with 420 subscribers of Investor this week:
- Review the financial statements of Cronos Group, Lowell Farms and Scotts Miracle-Gro.
- Composition of sample portfolio 23.04.21
- Cannabis Subsector Review – 04/23/21
Here are some of the most notable names on this week’s 420 Investor Focus List:
- APHA announced that its Broken Coast division has begun selling concentrates. The company has also marketed concentrates under the Good Supply brand name.
- The CCHWF is buying a huge greenhouse in Riverhead, Long Island, for $42.5 million.
- CGC settled its licensing dispute with Cure Pharmaceutical by paying $3.95 million.
- CRLBF announced that its $1 billion offshore registration is complete and now active with the SEC.
- CURLF announced that its European division has taken the first step in obtaining Novel Food approval for its synthetic CBD products. The company opened its first adult store in Maine.
- In the fourth quarter, FFLWF reported revenue of CAD 43.2 million, up 157%, and adjusted EBITDA of CAD 1.5 million. The company promotes its CFO to COO and hires a new CFO.
- GNLN has announced the management team of the combined company following its acquisition of KushCo Holdings.
- GRAMF has introduced Caliva flower sticks for Omura vaporizers.
- GRWG has entered the Mississippi market with a new 40,000 square foot store it is developing. The company announced a project in Oregon with Belushi Farms.
- GTBIF refinanced and replaced its previous debt with a larger issuance of $217 million with a maturity of three years and 7%, through the issuance of 1.46 million five-year warrants at $32.68.
- HBORF’s net income increased in the fourth quarter. Quarter up 11% to $12.5 million
- SHWZ announced preliminary revenue for the first quarter of $19.3 million and $26.8 million on a pro forma basis.
- SMG increases its dividend by 7%.
- TLLTF has received local approval to open an adult store in Brockton, Massachusetts.
- TLRY shareholders approve merger with Aphria
- VREOF presented its own line of country flowers in New York.
The Global Cannabis Value Index rose for the second consecutive week, closing at 61.19, up 3.8% :
Theindex, which lost 34.1 percent in 2019 and 54.9 percent in 2018 after rising 91.8 percent in 2017 and 88.8 percent in 2016, rose 5.2 percent in 2020. For 2021, it has increased by 37.8%. It currently has 48 shares and ended 2020 at 44.39 :
Examples of portfolios
420 Investor offers subscribers three model portfolios, two of which are long-term and fully invested to beat the Global Cannabis Stock Index, 420 Opportunity and 420 Quality. 420 Opportunity ended the week with an estimate of $177,482, up 4.4%. The model portfolio increased 68.4% in 2021, 35.6% in 2020 and 255.0% since April 2014. 420 Quality ended the week at $263,624, up 4.8% for the week and now up 63.2% in 2021 after a 42.8% gain in 2020. Launched in March 2017, the model is aimed at long-term investors looking to invest in leading cannabis stocks with low portfolio turnover. Since its inception, it has yielded 427.3%, versus the index’s 24.3% decline. Flying High, which focuses on swing trading, closed the week with a valuation of $459,073, up 3.6%. The model portfolio is 52.7% in 2020 and 81.9% in 2021, with a return of 4491% since inception in late 2013.
After a strong recovery in early 2019, the cannabis sector saw a sharp decline to unprecedented levels the following year due to several negative events, including the CannTrust scam, the unexpected resignation of Bruce Linton as CEO of Canopy Growth, the disappointing start to legalization in Canada, confusion over CBD regulation in the US and the slow start to legalization in California, the vaping crisis, and then the financial turmoil and market disruption caused by the COVID-19 pandemic. In the industry, the capital available to fund expansion has dried up, a situation that continues to put heavy pressure on companies with negative cash flow, as the availability of capital is constrained by stronger market participants.
Cannabis stocks overreacted and reached their bottom in March 2020. Today they benefit from the perception that the sector offers good growth prospects, which was not the case then. One important change is that the pandemic has forced many regulators to allow previously prohibited retail activities, such as home pickup and delivery. The legal market is growing rapidly and is becoming even more convenient than the illegal market because orders can be placed online. High unemployment and large deficits have fueled states’ legalization efforts, as have more favorable regulatory controls at the local level. Access to capital has improved dramatically and large companies are generating significant and rapidly growing revenues and profits.
There are several potential catalysts, including the FDA providing clarity on CBD regulation, the progress of legalization in Canada that began in October 2018 and is gradually covering a wider range of products, and the continued growth of German and Israeli MMJ and other international markets that have been slow to develop. Implementation in California and Massachusetts for adults has been slow, but there are already significant improvements. Michigan and Illinois legalized adult-use drugs in late 2019, and those markets are showing strong growth that could prompt other states to legalize. Voters in Arizona, Montana, South Dakota and New Jersey approved adult drug legalization in November, and New Mexico, New York and Virginia introduced legalization in the legislature in 2021.
Key issues in the future are likely to include continued cross-industry investment in the sector and further consolidation in Canada and the United States, possible federal regulatory reform (the SAFE Bank Act and other broader legislation that could eliminate the 280E tax and allow co-ops to trade on higher exchanges, as well as the widespread use of credit cards to purchase cannabis) measures to enable cannabis research, the introduction of MMJ in Germany, Mexico and Australia, continued progress in South America and the eventual legalization of adult-use cannabis in Israel and Mexico the introduction of new legal cannabis in AZ, MT, NJ and SD and the introduction of MMJ in MS, WV and VA, the eventual legalization by legislators in CT, DE, FL, MD, MN, NH, PA and RI, and the introduction of commercial programs in NM, NY and VT in 2022 and in VA in 2024.
Stay ahead of the crowd by subscribing to 420 Investor, the largest and most comprehensive subscription service for cannabis dealers and investors since 2013.
Based in Houston, Alan draws on his experience as founder of the 420 Investor online community, the first and still largest due diligence platform focused on publicly traded stocks in the cannabis sector. Through his many connections in the cannabis community, Alan continues to find new ways to bring the industry together and promote sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Until early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent analyst and then for more than two decades in research and portfolio management. Alan is a prolific writer with over 650 articles published on Seeking Alpha since 2007, where he has 70,000 subscribers. He is a frequent speaker at industry conferences and appears regularly in the media, including the NY Times, Wall Street Journal, Fox Business and Bloomberg TV. Get in touch with Alan: Twitter | Facebook | LinkedIn | E-mail
In this section:
apha, Aphria, Canopy Growth, CCHW, CCHWF, CGC, cl, Columbia Care, Cresco Labs, CRLBF, cura, Curaleaf, curlf, FAF, fflwf, Fire and Flower, gnln, gram, GRAMF, Green Thumb Industries, greenlane, GrowGeneration GRWG, gtbif, Gti, gtii, Harborside, hbor, HBORF, kshb, KushCo Holdings, schwazze, Scotts Miracle-Gro, SHWZ, smg, The Parent Company, Tilray, TILT, Tilt holdings, TLLTF, TLRY, TPCO Holding, vireo vreo, vreof, WEED
Canadian cannabis stocks continue to consolidate in April
Parent companyhas partnered with Omura to launch the new Calivaflower sticks.
Greenlane and KushCo announce future management team for plannedcombination
Green Thumb Industries refinances previous debt with $217 million of new 7%senior notes.
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