After breaking a three-month losing streak, up 1% in June, the Canadian Cannabis LP Index fell sharply in July, declining 9.8% to 324.18:
The index, which fell 30.1% in 2020 to end at 275.16, is up 13.6% last year and 17.8% year-to-date in 2021:
It remains well below the all-time closing high of 1314.33 in September 2018, just before Canadian legalization. In March 2020, it hit a new 52-week closing low of 196.10, a level not seen since the end of 2016, and closed 65.3% above that level at the end of July:
The monthly rebalanced Canadian Cannabis LP Index comprised 38 qualified publicly traded licensed producers trading in Canada at the end of June, with equal weights for each share. Each of the members was also included in a sub-index, with 3 on the Canadian Cannabis LP Tier 1 Index, 15 on the Canadian Cannabis LP Tier 2 Index, and 20 on the Canadian Cannabis LP Tier 3 Index during the month. At the end of June 2020, we revised the admission rules and require companies to pay a price of at least CAD 0.20, unless they generate at least CAD 2.5 million quarterly from their cannabis production. Previously, we needed more than $ 1 million in revenue for stocks trading below $ 0.20. There are currently around two dozen listed LPs that do not qualify.
Tier 1, which included those LPs with revenue of $ 25 million or more per quarter, fell 20.6% to 558.85 in July. Tier 1, which fell 23.9% in 2020 when it ended at 488.96, has rebounded 14.3% in 2021. We have increased the minimum sales required over time. At the beginning of 2021, we increased it by CAD 20 million. In 2019 and the first half of 2020, companies required sales of more than CAD 10 million to be accepted. In 2018, we used Canadian $ 4 million as a hurdle.
That group included Aurora Cannabis (TSX: ACB) (NASDAQ: ACB), Canopy Growth (TSX: WEED) (NASDAQ: CGC), and Tilray (TSX: TLRY) (NASDAQ: TLRY).
Among these top-selling LPs, Aurora Cannabis was the worst performing at -22%, while Tilray was the worst performing at a decline of 18.6%.
Tier 2, which included the LPs that generate cannabis-related quarterly sales between $ 5 million and $ 25 million, fell 10.0% to 503.90. In 2020, it lost 35.9% in 2020, closing at 365.19, and in 2021 it is up 38.0%. Prior to July 2020, companies needed more than $ 2.5 million in revenue 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), Decibel Cannabis (TSXV: DB) (OTC: DBCCF), Delta 9 (TSX: DN) (OTC: DLTNF), Entourage Health (TSXV: ENTG) (OTC: WDDMF), HEXO Corp (TSX: HEXO) (NYSE: HEXO), Indiva (TSXV: NDVA) (OTC: NDVAF) MediPharm Labs (TSX: LABS) (OTC: MEDIF), Organigram (TSX: OGI) (NASDAQ: OGI), The Green Organic Dutchman (CSE: TGOD ) (OTC: TGODF), Valens Company (TSX: VLNS) (OTC: VLNCF), Village Farms (TSX: VFF) (NASDAQ: VFF) and VIVO Cannabis (TSX: VIVO) (OTC: VVCIF).
The top performer for the third straight month was Decibel Cannabis, which gained 7.8%. The weakest name was HEXO Crop, down 31.3%.
Tier 3, which included the 20 qualifying LPs with cannabis-related quarterly sales less than CAD 5 million, fell 8.0% when it closed at 70.26. It ended at 66.59 in 2020, a decrease of 31.2%, and has increased 5.5% in 2021. Pure Extraction Technologies (CSE: PULL) (OTC: PRXTF), which heavily promoted its stock, was the strongest performer, up 62.5%. Neptune Wellness (TSX: NEPT) (NASDAQ: NEPT) performed worst with a minus of 29.9%.
Returns for the sector as a whole varied widely, with 4 names increasing and 6 decreasing more than 20%. The entire group achieved a median return of -11.0%:
For August, the overall index will have 39 components, with Cannara Biotech (TSXV: LOVE) (OTC: LOVFF) being added to Tier 2.
In the next monthly review we will summarize the performance for August and discuss any additions or deletions. Make sure to bookmark the pages to keep up to date with the movement in the price of LP stock within the day or day-to-day.
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Alan is based in Houston and leverages his experience as the founder of the online community 420 Investor, the first and still largest due diligence platform focused on publicly traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and enable its sustainable growth. At New Cannabis Ventures he is responsible for content development and strategic alliances. Before Alan, who began his career on Wall Street in 1986, switched his focus to the cannabis industry, he worked as an independent research analyst after over two decades in research and portfolio management. A prolific writer with over 650 articles published on Seeking Alpha since 2007, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source for the media including the NY Times, the Wall Street Journal, Fox Business , and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | E-mail
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In this article:
48North, ACB, AH, aleaf, Aleafia Health, Aurora Cannabis, auxly, Canopy Growth, cbwtf, CGC, CRON, Cronos Group, db, dbccf, Dezibel Cannabis, Delta 9, dn. dltnf, entg, entourage health, Green Organic Dutchman, Hexo, hexo corp, INDIVA, Labs, medif, MediPharm Labs, ncnnf, NDVA, ndvaf, NEPT, neptun, nrth, OGI, Organigramm, prxtf, pull, TG pure extract technologies, TG , TGODF, Tilray, TLRY, Valens, VFF, Village Farms, vivo Cannabis vivo, vlncf, vlns, vvcif, WDDMF, WEED, weedmd, xly