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Michael Brush

Michael Brush

Chief Analyst, Cabot Cannabis Investor

Michael Brush is an award-winning Manhattan-based financial writer who writes a stock market column for MarketWatch. He is editor of Brush Up on Stocks, an investment newsletter. Brush previously covered the stock market, business and economics for the New York Times, the Economist Group, MSN Money, and Money magazine.

Brush attended Columbia University Business School (Knight-Bagehot Fellowship program), and the Johns Hopkins University School of Advanced International Studies (SAIS).

He is the author of Lessons from the Front Line (published by John Wiley), a book offering investing insights based on the experiences of leading professional money managers he’s met on the job.

Brush has received several awards for excellence in journalism including the Best in Business award from the Society of American Business Editors (SABEW), the American Society of Magazine Editors’ National Magazine Award for General Excellence in New Media, and awards for excellence in local news coverage in Pennsylvania, where he started his career.

From this author
After rising sharply on good news earlier this year, cannabis stocks are again in the doldrums. But there’s a huge catalyst that could drive them much higher; here are our thoughts.
Old-school value managers like Benjamin Graham and Warren Buffett used to have a funny way of describing their investing style.

They said value stocks were like cigar butts on the sidewalk that had a few puffs left in them.

I’d like to offer an updated version of this metaphor. I think cannabis stocks have a few more puffs left in them between now and the end of the year.

Cannabis names are thoroughly unloved and abandoned once again.
Cannabis stocks are well off their 2024 highs, but investors are discounting four major catalysts that offer hope for the sector in the year ahead.
All the focus is on federal rescheduling, but these three state-level developments may be more important for cannabis investors and cannabis stocks.
Cannabis stocks are unloved and in the doldrums.

Typically, in the stock market, that’s the best time to buy.

Neglected stocks offer the best value, as long as there are potential catalysts on the horizon.

I believe that is the case with cannabis. You’ll just have to be patient. I think it is worth being patient for the possibility of 30%-50% gains when a catalyst strikes. There is no guarantee this will happen, but as I discuss below, the odds are good.
Since Halloween, the last seven times I have made a call in Cabot Cannabis Investor to buy the AdvisorShares MSOS 2X Daily (MSOX) in sector weakness, the exchange-traded fund has gone up 68% on average over the next one to seven weeks.

The last time I made a trading call to buy the cannabis sector was on May 29.

Since that was less than two weeks ago and the maximum time to profit after trading calls is seven weeks, I am not too concerned about the flat performance of cannabis stocks since then.
The most important arena is rescheduling, but marijuana stocks are poised to benefit from progress toward legalization around the world. These are the four “fronts” I’m watching closely.
Rescheduling progress, a second major catalyst on the horizon and buyable sector weakness all point to significant upside ahead for marijuana stocks.
Sentiment among cannabis investors has swung bearish, but for all the wrong reasons. These four catalysts signal brighter days ahead.
Cannabis stocks remain unloved by investors. This makes the group buyable because catalysts are on the horizon.

The tricky part now is that it is more difficult to predict that we may see a catalyst near term, or even when the next one will occur. Patience is required.

Here is a look at the four main potential catalysts.
Cannabis sector negativity and weakness persists, so the group continues to be a buy.

Now it is time to continue to average in at current prices, ahead of the next catalyst-induced move up.
Back on May 8, I suggested getting long cannabis as a contrarian trade because sentiment had turned dark, and there was a potential catalyst on the horizon.
Investors are eagerly awaiting a cannabis stock catalyst that could arrive any day now and significantly boost the outlook for the sector.
Cannabis stocks look buyable in the current weakness.

Cannabis stocks are always buyable when they are down, but there are potential near-term catalysts on the horizon. That is the case now. There are three to expect over the next few months, and possibly as soon as the middle of May.
Back on April 24 I suggested cannabis stocks looked like a buy in their weakened state. I singled out two ETFs for simplicity.
After a strong March and a brief correction in April, we’re looking ahead to two catalysts to drive sector sentiment and cannabis stocks higher.
Cannabis stocks have fallen sharply since the beginning of April. The AdvisorShares Pure U.S. Cannabis (MSOS) is down 15.4% since April 1. There are two reasons.

First, investor enthusiasm for stocks overall has waned, creating significant declines across indices. Because cannabis is perceived as a riskier sector, cannabis stocks decline more than most stocks when investors move into risk-off mode.

Second, many analysts and investors had hoped for visible progress on key catalysts by now – chiefly rescheduling and cannabis banking reform. They have been disappointed.
Cannabis stocks look attractive in the current weakness. While there will likely be more general market downside, a negative for cannabis since the group gets sold when sentiment shifts to “risk off,” two potential catalysts loom.
April 20, or “420" is a celebrated day for cannabis, and a good time for cannabis stocks, but not for the reason you might think.
Cannabis stocks are generally flat since I sent you the March 27 issue of Cabot Cannabis Investor.

Given the potential magnitude of near-term catalysts, I suggest continuing to hold exposure to the group, and accumulating on weakness. If you have zero exposure, consider buying some now. If you have full exposure, consider adding on any substantial weakness of 2%-4% or more in this highly volatile group.
Cannabis stocks rallied hard Monday, particularly after the close when we learned that the Florida Supreme Court approved a referendum on legalizing the sale of cannabis for recreational use. Florida already permits medical use, but the change would expand the size of the Florida cannabis market significantly, especially considering Florida’s large tourist industry.
While we wait on rescheduling news out of Washington, it’s important not to lose sight of meaningful progress toward nationwide cannabis acceptance that makes the group investible now.
Our main Cabot Cannabis Investor portfolio has vastly outperformed this year, with a 38% gain as of the March 26 close. That was 15 percentage points better than the 22.8% gain for the New Cannabis Ventures Global Cannabis Stock Index. We’ve done 31 percentage points better than the 7.1% gains this year in the S&P 500.

Our Cabot Cannabis Plus Insider Portfolio is up 42.6% since I launched it on March 29 last year. That’s more than twice the 16.8% gain in the Russell 2000 index over the same time.
Recent comments by Vice President Harris have sparked a major rally in cannabis names, here’s why it’s only the beginning.
Comments from Vice President Kamala Harris sparked a major rally in cannabis stocks, which are well positioned ahead of further catalysts on the horizon.
Since I last wrote to you on February 28, cannabis stocks have fallen nearly 14%, using the AdvisorShares Pure U.S. Cannabis (MSOS) as a proxy for the group.

There are certainly good reasons why “the doubts” have crept back into the minds of cannabis investors, which I will explain in a second. But my take is that by now, the concerns may be fully priced in, so the group looks like a solid buy.
While Washington, D.C. dithers on rescheduling, we continue to see signs of cannabis sector progress around the world.
In my last update on February 14, I suggested cannabis stocks had fallen enough to be buyable ahead of the expected rescheduling catalyst. That was an opportune entry point.

As of the close February 23, the AdvisorShares Pure U.S. Cannabis (MSOS) and the leveraged version, AdvisorShares MSOS 2X Daily (MSOX), were up 12% and 20%, respectively.

Then investors got impatient again with the lack of progress on catalysts. As of the close February 27, 2024, volatile cannabis stocks had given back most of these gains. The MSOS was up 2.4% and the MSOX was up 1.7%. I think cannabis stocks have weakened enough to consider adding again (more on this below).
Cannabis stocks have been rallying to start the year, but is it the real deal or just another false start from the oversold group?