What’s New With Hashish Shares for the Week Ending 01/07/22 – New Hashish Ventures

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summary

  • BDSA data suggests cannabis sales fell slightly in November
  • December was a record month for legal cannabis sales in Illinois
  • 420 investor model portfolios have returned -4.4% to -1.9% over the year to date, while the Global Cannabis Stock Index has lost 2.9%

review

Illinois cannabis sales rose sharply from November to a record $ 173 million in December, up 14% from November and 43% year over year. BDSA data for November showed stagnant growth in most of the markets it covers.

Over the week, I shared these insights with subscribers of 420 Investor:

  • Composition of the model portfolio 31.12.21
  • Review of the cannabis subsector – 12/31/21
  • Hifyre December Canadian Retail Estimates
  • Get ready to make strategic investments in American cannabis companies
  • Preview of upcoming org chart and Tilray financial reports

Here are some of this week’s highlights for 420 names on the Investor Focus List:

  • AAWH publicly reprimanded MedMen for unilaterally terminating its binding agreement to acquire MedMen’s New York business. It completed two previously announced pharmacy acquisitions in Chicago, previously known as Midway, reaching 8 in Illinois.
  • AYRWF announced that it has repurchased 568K shares as part of its previously announced program.
  • CCHWF opened its 4th pharmacy in Virginia.
  • CGC has published its first ESG report.
  • CURLF appointed a new president following the announced resignation of its COO, who was previously one of the founders of Grassroots Cannabis.
  • GNLN President (and former CEO) Aaron LoCascio has resigned. He also loaned the company $ 8 million at 15% for six months.
  • GRWG acquired Mobile Media and MMI Agriculture, which manufacture mobile shelving systems for agricultural businesses, for $ 9.4 million.
  • SMG reported a 40% year-over-year revenue decline for Hawthorne in the first quarter and lowered its fiscal year outlook from -10% to zero growth from its previous forecast of 8-12%. The company also announced two acquisitions for $ 225 million, including a lighting company and a seller of liners and storage solutions for drying and curing equipment.
  • TCNNF introduced the brand of a California blunt manufacturer in Arizona. It opened its 14th pharmacy in Pennsylvania.
  • TRSSF has appointed a former Parallel executive with extensive experience at Walgreens as its new President and COO.
  • UGRO announced annual sales of $ 65 million in advance, with backlog increasing from $ 22.5 million in the third quarter to more than $ 30 million.
  • VFF investor Sundial announced an initial stake of 7.3%.
  • VRNOF has appointed a new CFO with extensive CPG experience, including most recently Head of Supply Chain Finance and CFO of The Kraft Heinz Company’s US operations.

Market performance

The Global Cannabis Stock Index started 2022 by extending the 2.9% decline that began in February to 31.91:

The index, which lost 26% in 2021 after gaining 5.2% in 2020, has fallen 2.9% in 2022. It currently comprises 38 shares and ended at 32.85 in 2021:

Model portfolios

420 Investor offers three model portfolios for subscribers, including two that are long-term and fully invested with the aim of beating the Global Cannabis Stock Index, 420 Opportunity and 420 Quality. 420 Opportunity ended the week at $ 89,060, down 1.9%. The model portfolio, which is down 13.8% in 2021 after growing 35.6% in 2020, is down 1.9% in 2022 and has been down 78 since April 2014 despite the index’s huge loss since then , Increased 1%. 420 Quality ended the week at $ 123,532, down 2.2% for the week. It is down 2.2% in 2022 and down 21.8% in 2021 after gaining 42.8% in 2020. Launched in March 2017, the model is aimed at long-term investors looking to invest in leading cannabis stocks with low portfolio turnover and has risen 147.1% since the beginning, versus the index’s 60.5% decline since then. Flying High, which is focused on swing trades, ended the week at $ 281,269, down 4.4%. The model portfolio increased by 16.6% in 2021 and 52.7% in 2020 and decreased by 4.4% in 2021. The return since inception at the end of 2013 is 2713%.

outlook

The cannabis sector has gone through several ups and downs over the past few years. 2021 started with massive gains in the fourth quarter, but hit a wall in mid-February, pushing the year’s balance back after the market overtook itself. Disappointment with the slow pace of federal reform or the move towards legalization was a factor, but declining growth in cannabis sales, regulatory delays in several states, and the implosion of the flower wholesale trade in California also played a role. In Canada, the market continued to grow, but the trend towards derivative products was slow. In addition, the largest LPs have lost market share and so far have not been able to scale.

The bull market, which began in March 2020 following the pandemic and the post-vaping crisis post-vaping crisis in 2019, appears to be intact for American cannabis operators, who, despite sharp declines, continue to trade significantly higher than they did in summer 2020 from the February peak. Looking ahead, the outlook looks good as the leading companies move to positive cash flow from operating activities and increasingly have access to non-dilutive capital, including debt, mortgages and sale-leasebacks. Several states will switch from pure medicine to adult use, including New Jersey, New Mexico, Vermont and Connecticut in 2022, New York in 2023, and Virginia in 2024. Several other states could also legalize its use by Make adults. including Delaware, Florida, Maryland, Minnesota, New Hampshire, Pennsylvania, and Rhode Island. Several states are also expanding their programs, with additional pharmacies for Illinois. The Medical State of Minnesota will add flowers and edibles in 2022, and Ohio is also expanding its program. The increased competition within certain state markets that is hurting profitability is likely to remain a challenge. Even if many see government legalization as positive, in my opinion it remains a potential risk factor.

While US cannabis company stocks continue to be held primarily by retail investors, institutional investment saw a surge in 2021. Another big development was the growth of the AdvisorShares Pure US Cannabis ETF (MSOS), which expanded access to cannabis companies for investors who don’t trade OTC stocks. In addition, a number of subsidiary companies have gone public and are trading on higher-level exchanges, giving institutional investors an opportunity to invest in the industry. We have seen several investments in American cannabis companies, mostly from Canadian LPs, but looking ahead, strategic investments through creative financial structures are likely to extend to CPG companies in 2022.

At the federal level, the FDA (or Congress) could provide clarity on CBD regulation. When it comes to THC, both Democrats (Cannabis Administration and Opportunity Act) and Republicans (States Reform Act) are promoting laws to legalize cannabis. While I think this will be a long process due to the complexity (different government regulations, role of the FDA, social justice, taxation), this is very different from what the developing cannabis sector was seeing just a few years ago: potential raids against the state legalization. I remain confident that Congress can push small reforms, including expanded research and SAFE banking. Reinforced financial reform that explicitly allows companies operating in government-legal cannabis to trade on higher-level stock exchanges would be extremely positive.

Outside the Americas, cannabis legalization continues to spread. While Canada remains the largest federal cannabis market, 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 could also be legalized for adult use. Australia’s medical program has started slowly but is picking up momentum. New Zealand also has a medical program. In Africa, several countries have legalized medical cannabis. Medicinal cannabis is of course widespread in Europe. Germany has been slow to develop but could legalize it for adult use. Other markets that have medicinal cannabis are Denmark, Greece, Italy, the Netherlands, Poland, and Portugal. The UK and Israel have medicinal cannabis, and Israel could legalize it for adult use. Let’s not forget Jamaica, of course!

Be ahead of the crowd by signing up for 420 Investor, the largest and most comprehensive premium subscription service for cannabis dealers and investors since 2013.

Alan Brochstein, CFA

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:

aawh, ascend wellness, ayr, ayr wellness, AYRWF, Canopy Growth, CCHW, CCHWF, CGC, Columbia Care, cura, Curaleaf, curlf, gnln, greenlane, GrowGeneration, GRWG, Scotts Miracle-Gro, smg, tcnnf, TER, Terrascend , TRSSF, TRUL, trulieve, ugro, urban-gro, verano, VFF, Village Farms, VRNO, vrnof, WEED

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