You’re reading a copy of 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.
Friends,
5 weeks ago, we posted here about how “extremely oversold” cannabis stocks were at the time. In that newsletter, we pointed out that investor sentiment was overly negative at that time, and we believe that investors are still not that optimistic about the sector.
July was a great month for cannabis stocks. It was a very short month for traders at only 20 days, but the bullishness that we expressed in June paid off. Our three model portfolios at 420 Investor gained 19.3-21.7% during the month, substantially more than the index.
During July, the Global Cannabis Stock Index rallied by 4.3%, which was less than half of the return of the S&P 500, which gained 9.2%. While our sector lagged, it was the first monthly gain in 17 months. We lifted off of the lowest closing price in its almost 10-year history on June 30th.
This past week, our sector lost 4.6%, while the S&P 500 gained 4.3%, skewing the relative performance for the month. Despite lagging, we are encouraged by the action. MSOs, as measured by the American Cannabis Operators Index, rallied sharply during the month. That index gained 18.8% during the month. We will be publishing a piece later today that explains the move. Looking at the MSO stocks in the Global Cannabis Stock Index, all six rallied, with Cresco Labs, up 36.6%, and Green Thumb Industries, up 14.8%, leading the way. We wrote about the performance last week, and there were three decliners of more than 20% that held that index back. The median of the index names beat the average by 1.2%.
We remain optimistic about the second half of the year, noting low valuations, negative sentiment and improving fundamentals due to several states launching adult-use ahead.
TILT Holdings, a combination of leading cannabis companies that deliver products and services to businesses operating in the industry, will report its second quarter earnings on August 15th. Analyst expectations show for 15% annual growth for Q2 revenue at $56 million with adjusted EBITDA expected to be $5 million. TILT Holdings, which rallied 17.7% in July, has a unique business model, an ancillary company with cannabis operations in three states with a fourth launching soon. Earlier this month, the company, in partnership with Shinnecock Indian Nation of New York, broke ground on a historic, tribally-owned cannabis enterprise in Southampton, N.Y.
Get up to speed by visiting the TILT Holdings Investor Dashboard that we maintain on their behalf as a client of New Cannabis Ventures. Click the blue Follow Company button in order to stay up to date with their progress.
Exclusives
Cannabis technology company Fyllo offers regulatory software solutions as well as marketing solutions for the industry. We last spoke with CEO and Founder Chad Bronstein in 2020 when the company was in the process of integrating the acquisition of CannaRegs. In this exclusive interview, we catch up to see how the company has progressed since.
The Global Cannabis Stock Index posted a gain for the first time in 17 months, rising 4.3% in July. The index, which includes 26 names, is down 53.1% this year so far after a 26% decline in 2021. We discuss both the strongest and weakest stocks in this exclusive.
Capital
XS Financial has provided a $15 million capital expenditure lease facility to Green Dragon / Eaze with an immediate drawdown of more than $2 million to purchase equipment. The equipment will result in improvements to existing processing facilities and buildouts for their Colorado and Florida expansions. “Having access to non-dilutive financing is a huge win for our shareholders,” said Trey Handley, CFO of Green Dragon/Eaze.
Financials
Despite strong performance of its Zig-Zag and Stoker products, Turning Point Brands reported Q2 net sales decreased 16.1% year-over-year to $102.9 million. Combined net sales for Zig-Zag and Stoker’s Products demonstrated resilience decreasing 0.9% for the quarter.
Tilray Brands reported Q4 cannabis revenue was down 3% sequentially at $53.3 million. Chairman and CEO Irwin D. Simon said, “Over the past year, we have accelerated the optimization of our operations and sharpened execution against our most profitable core business opportunities in medical, adult-use, wellness, and beverage-alcohol across Canada, Europe, and the U.S.”
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Sincerely,
Alan & Joel
