What’s new with cannabis stocks for the week ending 12/10/21 – New Cannabis Ventures
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- Adult sales in Illinois are up 61% from a year ago in November.
- The SAFE Banking Act has been removed from the National Defense Authorization Act.
- 420 model investor portfolios have returned -15.3% to 26.0% year-to-date, while the Global Cannabis Stock Index has lost 20.7%.
Illinois adult-use sales increased 2% sequentially and 61% from a year ago to $ 120.8 million in November. Combined with medical, total cannabis sales increased 44% to 152.3 million. The National Defense Authorization Act did not include the SAFE Banking Act in the final version, which some had hoped would happen. Retail sales of cannabis in Canada in November appear to have been quite weak, according to Hifyre data.
Over the week, I shared this information with 420 Investor subscribers:
- Overview of the financial statements of Fire & Flower Q3
- 2022 end-of-year price targets for major MSOs
- Composition of the model portfolio 03/12/21
- Cannabis Sub-Sector Review – 03/12/21
Here are some of this week’s highlights for 420 names on the Focus Investor List:
- AYRWF Received Approval To Begin Cultivation At Its Phoenix Growing And Production Facility
- CCHWF completed rebranding of its Florida stores to Cannabist
- CRLBF opened its 12th dispensary in Florida and closed its $ 80 million Pennsylvania acquisition of Laurel Harvest
- CURLF has launched a new edible product, Select X Bites, with a faster onset of action and a longer duration of effect.
- FFLWD announced the pending acquisition of Canadian cannabis delivery and logistics company Pineapple Express Delivery for C $ 5.3 million in cash and 1.13 million shares, valuing the transaction at approximately 1.1x income.
- GDNSF launched a new line of edibles in Maryland
- GRWG has moved its store in Phoenix to a new location offering 25,000 square feet.
- GTBIF opened a Rise dispensary in Reno, Nevada
- TCNNF has opened its 111th dispensary in Florida
- TLRY issued 11.24 million shares valued at $ 102.9 million to acquire Colorado-based alcoholic beverage maker Breckenridge Distillery, with estimated annual sales of $ 20 million and EBITDA of about $ 5 million. IntelGenx has filed for arbitration against the company for violating its agreement to co-develop and commercialize cannabis-infused tapes.
- VLNS started trading on NASDAQ
- VRNOF has opened its 40th dispensary in Florida
The Global Cannabis Stock Index posted a new 52-week closing low earlier in the week, then rebounded, rising 1.4% during the week to 35.21:
The index, which lost 34.1% in 2019 and 54.9% in 2018 after gaining 91.8% in 2017 and 88.8% in 2016, is up 5.2% in 2020. It has lost 20.7% in 2021 so far. It currently includes 42 stocks and ended 2020 at 44.39:
420 Investor offers three model portfolios to underwriters, two of which are long-term focused and fully invested with the goal of beating the Global Cannabis Stock Index, 420 Opportunity and 420 Quality. Opportunity 420 ended the week at $ 99,957, up 1.1%. The model portfolio, down 5.1% in 2021, gained 35.6% in 2020 and has increased 99.9% since April 2014 despite the index’s sharp loss since then. 420 Quality ended the week at $ 138,418, up 1.4% for the week, and is now down 14.3% in 2021 after gaining 42.8% in 2020. The model was launched in March 2017 targeting long-term investors looking to invest in major cannabis stocks with low portfolio turnover and has gained 176.8% since inception compared to the index’s 56.5% decline since then. Flying High, which focuses on swing trades, ended the week at $ 318,142, up 0.6%. The model portfolio gained 52.7% in 2020 and is up 26.0% in 2021, and the return since its inception in late 2013 has been 3,171%.
The cannabis industry has continued to evolve through several ups and downs over the past few years. 2021 started off with massive fourth-quarter gains but hit a wall in mid-February, slipping the rest of the year after the market got ahead. Disappointment with slow federal reforms or the move towards legalization was a factor, but declining growth in cannabis sales, regulatory delays in several states, and the implosion of the wholesale flower market in California have also been a factor. play a role. In Canada, while the market has continued to grow, the move towards derivatives has been slow. In addition, the biggest LPs have lost market share and have not been able to evolve so far.
The bull market that began in March 2020 after the pandemic and capital crunch that followed the vaping crisis in 2019 appears to be intact for U.S. cannabis operators, who continue to trade significantly higher than where they traded at summer 2020 despite sharp declines since the peak in February. Looking ahead, the outlook looks strong, with major companies moving towards positive operating cash flow and increased access to non-dilutive capital, including debt, mortgages and sale-leasebacks. Several states will switch from medical-only to adult use, including New Jersey, New Mexico, Vermont and Connecticut in 2022, New York in 2023, and Virginia in 2024. Several other states may also switch to legalization of adult use, including Delaware, Florida, Maryland, Minnesota, New Hampshire, Pennsylvania, and Rhode Island. Several states are also expanding their programs, with additional dispensaries coming to Illinois. The medical-only state of Minnesota will add flowers and edibles in 2022, and Ohio is expanding its program as well. Growing competition in some state markets weighing on profitability will likely remain a challenge. Also, while many see federal legalization as a positive, in my opinion it remains a potential risk factor.
While shares of U.S. cannabis companies continue to be held primarily by retail investors, 2021 has seen an increase in institutional investment. Another big development has been the growth of AdvisorShares Pure US Cannabis ETF (MSOS), which expanded access to cannabis companies for investors who do not trade shares over-the-counter. Additionally, a number of ancillary companies have gone public and trade on higher stock exchanges, providing institutional investors with a way to invest in the sector. We have seen several investments in U.S. cannabis companies, mostly by Canadian production companies, but in the future, strategic investments through creative financial structures will likely extend to CPG companies in 2022.
At the federal level, the FDA (or Congress) could clarify the regulation of CBD. When it comes to THC, Democrats (Cannabis Administration and Opportunity Act) and Republicans (States Reform Act) are pushing forward legislation to legalize cannabis. While this is in my opinion a long process due to the complexity (varying state regulations, role of the FDA, social fairness, taxation), it is very different from what the developing cannabis industry has faced there. Just a few years ago: potential crackdowns on state legalization. I remain hopeful that Congress can push forward with small reforms, including expanded research and SAFE Banking. Stronger financial reform that would explicitly allow companies operating in state-legal cannabis to trade on higher exchanges would be hugely positive.
Beyond America, the legalization of cannabis continues to proliferate. Although Canada remains the largest market for legal cannabis federally, many other countries have medical programs, including Argentina, Chile, Colombia, Ecuador, Peru, and Uruguay (fully legal) in South America. Mexico has legalized possession but does not yet have a regulated program, and it may legalize adult use as well. Australia’s medical program was slow to start but has gained ground. New Zealand also has a medical program. In Africa, several countries have legalized medical cannabis. Europe, of course, has seen the widespread adoption of medical cannabis. Germany has been slow to develop but may switch to legalization for use by adults. Other markets where there is medical cannabis are Denmark, Greece, Italy, the Netherlands, Poland and Portugal. The UK and Israel have medical cannabis, and Israel may move towards legalization for adult use. Of course, let’s not forget Jamaica!
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