You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.
Friends,
Things are still choppy, but cannabis stocks are rallying as measured by the NCV Global Cannabis Stock Index. In August, the index has dropped 2.9%, but it is up 2.9% in Q3 so far and up 9.2% in 2024:
In Q3, the S&P 500 has dropped a bit, though it is still up more year-to-date than the Global Cannabis Stock Index. The Russell 2000, which measures small-caps, is a more appropriate index, and it is up just 3.0% so far in 2024. It has dropped 7.7% in August. Cannabis stocks are faring well relative to the R2000!
The one-year chart above shows the rocketing of the index in late August into September when the DEA’s potential rescheduling came into the news. The spike in April took place when the DEA confirmed that it was recommending that cannabis be rescheduled from Schedule 1 to Schedule 3, which would wipe out 280E taxation. The comment period ended in July, and the DEA is likely to make this move.
I have gotten increasingly bullish and have written more optimistically. My model portfolio at 420 Investor is doing quite well relative to the Global Cannabis Stock Index. This week, its return was boosted by large positions in Organigram and Planet 13, both of which have rallied about 30% since Friday. We have shared these picks here and are glad to see investors buying the stocks we have liked. We have shared some other ideas here too, and we have warned about some others. Not all cannabis stocks make sense right now!
Last week, I described the cannabis market as a big call option. Of course, there is the positive impact of 280E going away that appears very likely, but there are other things that can help shake cannabis stocks out of the bear market over the past three and a half years. I mentioned last week that Canada could do away with its very high cultivation tax, and this remains the case. I also mentioned again that the New York cannabis market is improving.
I was just in New York City for the first time in over a year. Last April, when my son got married, I had wanted to go to an adult-use store. There weren’t very many of them, and the one we went to visit had a very long line, and I skipped going in. I have been following adult-use in New York closely, and, I visited two stores on this trip. Nicklz, which is on 8th Avenue in Manhattan near 49th Street, impressed me. I spoke with one of the owners and learned about their history. The store opened in June – nice timing!
New York is a very large cannabis market, and it is likely to continue to convert from the illicit market to the legal market after a very long delay. There are a few publicly traded companies in the state, and some have been converting their medical stores to adult-use. Green Thumb Industries operates a medical dispensary on East 30th and 5th Avenue in Manhattan and one in Long Beach just outside of NYC, and it operates 3 adult-use stores upstate. Curaleaf also operates three adult-use stores in the state. Pharmacann, which is not publicly traded, has an adult-use store in Albany. Etain operates an adult-use store in White Plains. Other medical operators in the state don’t have adult-use stores yet, but this is likely to happen. I used to believe that New York would be the “next California” soon, but that turned out to be a bad aspiration. California has been a mess, but it could get better too.
We discussed 280E in late 2022 and also mentioned that moving from the OTC to higher exchanges would be a potential catalyst. There is still no news on that front. With rescheduling on track and prices still low, I am a lot more optimistic about cannabis stocks than I have been, but it seems awfully quiet! Many who were bullish are worn out waiting. For investors or traders who want the cannabis call options, there is very limited institutional focus on the sector. You are competing with worn out retail investors.
So, I am getting more bullish. I am not yet declaring an end to the bear market, but I think it will transition to a bull market. Again, MSOs aren’t the only way to play. My model portfolio currently has 21.5% exposure to that sub-sector. The Canadian LPs at 26.0% are larger, and Ancillary is now 46.4%. As I have said, there are lots of ways to potentially make money investing in cannabis stocks.
This week’s newsletter is sponsored by PricewaterhouseCoopers Inc.
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New Cannabis Ventures publishes curated articles as well as exclusive news. Here is some of the most important content from this week:
Exclusive
Cannabis Q2 Earnings Season Shakes Things Up
Florida Medical Patient Growth Again Sets New All-Time Low
Michigan Cannabis Sales Lift Modestly in July
Financial
Organigram Q3 Revenue Increases 25%
Mergers and Acquisitions
SNDL To Buy Rest of Nova Cannabis for C$1.75 per Share
To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.
Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer the Canadian Cannabis LP Index, the American Cannabis Operator Index and the Ancillary Cannabis Index.
View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.
Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.
Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.
Sincerely,
Alan
