The Canadian Cannabis LP Index pulled back slightly in April, its second straight decline after a strong first two months to begin the year, declining 4.9% to 369.45:
The index, which rallied 22.1% in Q4 but still fell 30.1% in 2020 to end at 275.16, is up 39.1% over the past year and 34.3% year-to-date in 2021:
It remains substantially below the all-time closing high of 1314.33 in September 2018, just ahead of Canadian legalization. In March 2020, it posted a new 52-week closing low of 196.10, a level not seen since late 2016, and it closed 88.4% above that level at the end of April:
The Canadian Cannabis LP Index, which is rebalanced monthly, included 39 qualifying publicly traded licensed producers that traded in Canada at the end of March, with equal weighting for each stock. Each of the members was also included in a sub-index, with 4 in the Canadian Cannabis LP Tier 1 Index, 13 in the Canadian Cannabis LP Tier 2 Index and 22 in the Canadian Cannabis LP Tier 3 Index during the month. At the end of June, we revised the rules for inclusion, requiring companies to have a price of at least C$0.20 unless they are generating at least C$2.5 million quarterly from their cannabis production operation. Previously, we required revenue in excess of C$1 million for stocks trading below C$0.20. There are currently about two dozen publicly traded LPs that fail to qualify.
Tier 1
Tier 1, which included the LPs that are generating cannabis-related sales of at least C$25 million per quarter, fell 10.3% to 722.32 in April. Tier 1, which dropped 23.9% in 2020 when it ended at 488.96, has rallied 47.7% in 2021. We have increased the minimum revenue required to be included over time. At the beginning of 2021, we raised it from C$20 million. During 2019 and the first half of 2020, companies needed to generate revenue in excess of C$10 million for inclusion. In 2018, we used C$4 million as the hurdle.
This group included Aphria (TSX: APHA) (NASDAQ: APHA), Aurora Cannabis (TSX: ACB) (NYSE: ACB), Canopy Growth (TSX: WEED) (NASDAQ: CGC) and HEXO Corp (TSX: HEXO) (NYSE: HEXO).
Among these largest LPs by revenue, HEXO Corp was the best performer, gaining 1.4%, while Aphria fell 18.2%.
Tier 2
Tier 2, which included the LPs that generate cannabis-related quarterly sales between C$5 million and C$25 million, fell 2.1% to 576.28. In 2020, it lost 35.9% in 2020, closing at 365.19, and it is up 57.8% in 2021. Prior to July 2020, companies needed revenue in excess of C$2.5 million to be included in this tier.
This group included 48North (TSXV: NRTH) (OTC: NCNNF), Aleafia Health (TSX: AH) (OTC: ALEAF), Auxly (TSX: XLY) (OTC: CBWTF), Cronos Group (TSX: CRON) (NASDAQ: CRON), Delta 9 (TSX: DN) (OTC: DLTNF), Organigram (TSX: OGI) (NASDAQ: OGI), Supreme Cannabis (TSX: FIRE) (OTC: SPRWF), TerrAscend (CSE: TER) (OTC: TRSSF), Valens Company (TSX: VLNS) (OTC: VLNCF), Village Farms (TSX: VFF) (NASDAQ: VFF), VIVO Cannabis (TSX: VIVO) (OTC: VVCIF), WeedMD (TSXV: WMD) (OTC: WDDMF) and Zenabis Global (TSX: ZENA) (OTC: ZBISF).
The best performer was Supreme Cannabis, which gained 37.0% after receiving an acquisition bid from Canopy Growth, with Valens gaining over 30%. Organigram lost 25.1%.
Tier 3
Tier 3, which included the 24 qualifying LPs that generate cannabis-related quarterly sales less than C$5 million, fell 5.6% as it closed at 79.00. It ended at 66.59 in 2020, declining 31.2%, and is up 18.6% in 2021. IntelGenx (TSXV: IGX) (OTC: IGXT) was the strongest name among Tier 3 for the second consecutive month, rallying 46.3%
The returns for the overall sector varied greatly, with 3 names gaining more than 20% and 3 declining by more than 20%. The entire group posted a median return of -6.3%:
For May, the overall index will again have 40 constituents, with the addition of Bevcanna (CSE: BEV) (OTC: BVNNF) to Tier 3. Decibel (TSXV: DB) (OTC: DBCCF) and MediPharm Labs (TSX: LABS) (OTC: MEDIF) will move from Tier 3 to Tier 2.
In the next monthly review, we will summarize the performance for April and discuss any additions or deletions. Be sure to bookmark the pages to stay current on LP stock price movements within the day or from day-to-day.
