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Friends,
While I remain optimistic that rescheduling will take place, the odds have decreased and the timing has extended. The entire cannabis market posted a new all-time low yesterday, and the New Cannabis Ventures Global Cannabis Stock Index is now down 7.7% in January after dropping each year for the past four years.
The index has 28 members currently, including 6 Canadian LPs. Those stocks have declined so far in 2025:
Of course, such a short time-frame doesn’t really matter much, but most of these stocks are down over the past year too. The Global Cannabis Stock Index has dropped 21.7% since the end of 2023. Two of the LPs that are currently in the index, Organigram and SNDL, have rallied since then, while two, Canopy Growth and Tilray Brands, have dropped more than 50%.
The potential rescheduling of cannabis by the DEA has no impact on the Canadian LPs, so why are all of the Canadian LPs in the index falling this month? I think the answer is very simple: No one cares about this part of the sector. I often discuss the cannabis stocks that I like, which includes Cronos Group, Organigram and Village Farms currently, suggesting that Canopy Growth and Tilray Brands are dragging them down.
Both Canopy Growth, which reports its fiscal Q3 on 2/7, and Tilray Brands, which reported its fiscal Q2 earlier this month, have posted new all-time lows. I remain negative on Canopy Growth, but I upgraded Tilray Brands to Neutral in an article at Seeking Alpha recently.
The three Canadian LPs that I include in my model portfolio at 420 Investor are all a lot cheaper than the big 2 that are down so much. My largest position, Organigram, will be reporting its fiscal Q1 in February. It has a large strategic investor that has upped its stake, and it trades near tangible book value. The historic tangible book value is C$2.12 per share, but it doesn’t include the net equity of the recently acquired Motif. This will be updated when they report. Cronos Group trades below tangible book value and also has a large strategic investor. Village Farms, which is not in the Global Cannabis Stock Index and is diversified but without a strategic partner, trades well below tangible book value.
While Cronos Group still has negative adjusted EBITDA, both Organigram and Village Farms are generating positive adjusted EBITDA. Their operations are federally legal in Canada, and both have international opportunities. These three stocks make up 34% of my 420 Investor model portfolio, which is a lot higher than the Global Cannabis Stock Index exposure to Canadian LPs.
Cannabis stocks sure seem cheap, but cheap doesn’t always lead to investment success. The MSOs are very cheap, but if 280E ends up remaining, it will present some huge challenges financially as they face debt maturities. Canopy Growth and Tilray Brands are pulling down Canadian LPs, and the stocks I like have no rescheduling failure risk. Today’s good news out of cannabis REIT IIPR is a reminder that sometimes good things do happen to cannabis stocks.
Sincerely,
Alan
New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:
Exclusives
Financial Reports
Cannabis REIT Reports Default Resolution
Hawthorne Q1 Revenue Declines Sharply
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