Cannabis Stocks Hold the All-Time Lows

You’re reading this week’s edition of the New Cannabis Ventures weekly newsletter, which we have been publishing since October 2015. The newsletter includes unique insight to help our readers stay ahead of the curve as well as links to the week’s most important news. We no longer send these by email as we did in the past, but we post this and all of the newsletters on our website here.

Friends,

A week ago, I wrote about the collapse of cannabis stock prices after the elections. The loss in Florida surprised the companies operating in that medical market, and it surprised investors too.

On Monday, cannabis stocks fell further, with many of the stocks posting all-time lows. The New Cannabis Ventures Global Cannabis Stock Index made a new 52-week low, but it held the all-time low set  a little over a year ago on October 30th, when the index closed at 6.91:

Even with the big rebound from a 52-week low set Tuesday at 7.07 to 7.51, the index is still down 7.4% so far in 2024. This compared to the S&P 500 being up 25.6%, and the Russell 2000, which measures perhaps more appropriately the Small-Caps, has rallied 17.1%. This is nothing new at all over the past almost four years: Cannabis stocks have been dropping while other stocks soar.

Worse than the overall sector, MSOs plunged substantially. The NCV American Cannabis Operator Index, which is now down 25.4% in 2024 at 11.44, posted an all-time low of 9.08 during trading on Monday, when it closed at 9.15. The big bounce yesterday from the lows yesterday that ended in a 7.6% gain can be attributed to Matt Gaetz being selected by Donald Trump to be Attorney General potentially. Gaetz is no Jeff Sessions!

I called out last week that the Global Cannabis Stock Index, down 7.6% year-to-date through 11/06, had not made a new all-time low, and this remains the case. In fact, while it doesn’t feel like stocks are up, the index has increased slightly since then. Many stocks, though, have posted new all-time lows and remain near them, especially in the MSO space. The American Cannabis Operator Index has increased by 7.5% over the past week, far more than the Global Cannabis Stock Index gain of 0.3%.

AdvisorShares Pure US Cannabis ETF (NYSE Arca: MSOS), the huge fund, posted a new all-time low this week. Over the past week, at 5.19 now, it has gained 4.4%. The all-time low was set Tuesday near the open at $4.00, so it closed 29.8% higher from there yesterday. It continues to suffer from a lack of diversification, as the 5 Tier 1 MSOs, its largest positions, account for almost  84% of the fund. I actually include #4 and #5 in my model portfolio at 420 Investor, where I hold now 62.9% in seven MSOs. My largest position, at 20%, is held at only 0.2% by MSOS.

Looking at the nine Tier 1 and Tier 2 MSOs, several of them posted all-time lows, including Ascend Wellness, Cannabist, Curaleaf, TerrAscend and Verano Holdings. The performance since 8/29/23, the day before the DEA received a recommendation from the Department of Health & Human Services to reschedule cannabis from Schedule 1 to Schedule 3, has been mixed:

MSOS has gained 7.0% since then, and the American Cannabis Operator Index is up 0.3%. The Global Cannabis Stock Index has gained 1.2%. Trulieve has almost doubled, while Cresco Labs and Green Thumb Industries are up over 40%. These three have outpaced the S&P 500. Four stocks, on the other hand, have been double-digit decliners. My model portfolio currently holds the weakest three.

One MSO that is not Tier 1 or Tier 2 but is part of the Global Cannabis Stock Index, Glass House Brands, did not make a new all-time low. Looking at the  remaining stocks in the Global Cannabis Stock Index, one that did make a new all-time low was Tilray Brands, which I continue to believe has negative prospects.

In my view, nothing has really changed: Cannabis stocks are very beaten up after an almost four-year decline, there are lots of inexpensive cannabis stocks, and rescheduling remains on track. Wiping out 280E will boost cash flows for American cannabis companies, and this will help their financial position and could boost their spending. Of course, there are some other good things that could happen, but they don’t need to occur.

I am not overly excited about Matt Gaetz potentially becoming Attorney General and suggest caution chasing MSOs here after the big bounce. Yes, they are cheap, but there may be a better chance to add most of the names that make sense. Tax-loss selling season could weigh on cannabis stocks for the rest of the year. As much as I like cannabis stocks, I do not like all of them relative to one another. Cannabis stocks across each of the sub-sectors are attractive for investment, but that doesn’t mean they will go up right away.

New Cannabis Ventures publishes curated articles as well as exclusive news. Here is what we published this past week:

Exclusives

The Florida Medical Cannabis Market Is Melting

Financial Reports

Ascend Wellness Q3 Revenue Was Flat

AYR Wellness Q3 Revenue Falls Sequentially

Cannabis MSO GTI Beat Revenue Estimates in Q3

Canopy Growth Q2 Revenue Sinks as Losses Increase

Cresco Labs Q3 Revenue Falls as Profitability Rises

To get real-time updates download our free mobile app for Android or Apple devices, like our Facebook page, or follow Alan on Twitter. Share and discover industry news with like-minded people on the largest cannabis investor and entrepreneur group on LinkedIn.

Use the suite of professionally managed NCV Cannabis Stock Indices to monitor the performance of publicly-traded cannabis companies within the day or over longer time-frames. In addition to the comprehensive Global Cannabis Stock Index, we offer the Canadian Cannabis LP Index, the American Cannabis Operator Index and the Ancillary Cannabis Index.

View the Public Cannabis Company Revenue & Income Tracker, which ranks the top revenue producing cannabis stocks.

Stay on top of some of the most important communications from public companies by viewing upcoming cannabis investor earnings conference calls.

Discover upcoming new listings with the curated Cannabis Stock IPOs and New Issues Tracker.

Sincerely,

Alan