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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 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?
Rather than chasing rallies, it pays to be patient and buy cannabis stocks on a pullback ahead of a number of promising catalysts.
It sounds heartless to say, but successful investing is largely about exploiting the emotions of others.

The two biggest emotions to exploit in the market are obviously fear and greed. When investors are too fearful, it pays to exploit that emotion by betting the other way. And vice versa for greed.

Another common emotion to exploit is impatience.
Our Cabot Cannabis Investor portfolio is up 35% this year. That’s more than 10 times the 3% gain for the S&P 500.

The broader cannabis sector has done well too, but not quite as well as our Cabot Cannabis Investor portfolio of the 12 best names in the space.

The New Cannabis Ventures Global Cannabis Stock Index and the ETFMG Alternative Harvest exchange traded fund (MJ) are up 14.5%. We’re up more than twice as much.

Our Cannabis Plus Insider Portfolio is up 39.3% since I launched it on March 29 last year. Here we have outperformed the market by threefold. The 39.3% advance compares to gains of 12.7% for the Russell 2000 index, and 22.3% for the S&P 500 over the same time. The smid-cap Russell 2000 is a more appropriate comp than large-cap names in the S&P 500. This portfolio invests in cannabis related companies that have the right kind of insider buying, and do not touch the plant.
With the first month of 2024 in the books, cannabis stocks are trouncing the markets and have even more promising catalysts on the horizon.
2024 is setting up to be a promising year for cannabis companies and investors, and these three reasons are just the beginning.
Cannabis stocks are up sharply – 20% or more – since I suggested buying them on weakness in a Cabot Cannabis Investor update sent to you on January 10.

Using my two favorite exchange-traded funds (ETFs) as proxies for the sector, the AdvisorShares Pure US Cannabis (MSOS) has advanced 20%, and AdvisorShares MSOS 2X Daily (MSOX) is up 37%.
Cultural and political trends can make buying cannabis stocks on a pullback a profitable endeavor, but it takes a combination of discipline and the right entry points.
Back on December 27 I suggested holding off on cannabis sector purchases given the group strength at the time. We had realized nice gains, and it did not make sense to chase the stocks. “I prefer to add on weakness rather than strength,” I wrote. I recommended adding on weakness of 2% to 4% or more in any of our portfolio names.

The AdvisorShares Pure US Cannabis (MSOS) and AdvisorShares MSOS 2X Daily (MSOX) exchange traded funds (ETFs) closed that day at 6.93 and 3.60, respectively, and went on to fall 4.5% to 9% over the next few trading days.
Legislative news has an outsized impact on cannabis stocks, but the performance of these two funds shows a groundswell of support that’s easy to miss in the headlines.
With a new year on the horizon, we’re making three bold predictions about what 2024 has in store for cannabis investors.
Our cannabis trades continue to perform very well, beating the market by more than tenfold since the last update, depending on the index position considered.

The AdvisorShares Pure U.S. Cannabis (MSOS), is up 10.5%, and the AdvisorShares MSOS 2X Daily (MSOX) is up 18.7% since I last suggested getting long cannabis on December 13. I suggested both as proxies for the sector, at the time.
A heavily redacted Freedom of Information Act (FOIA) request lays the groundwork for cannabis rescheduling, here are five big takeaways from reading between the lines.
There are three big developments in the cannabis space to report.

* A buyout of one of our portfolio names, which nets us 105% gains in four months.

* A confirmation that the Biden administration is serious about some major cannabis reform, which would be a huge catalyst for the group.

* A buyable selloff. Cannabis stocks sold off sharply Tuesday probably based on false fears that rescheduling won’t happen. I think that’s wrong, and the weakness is a buy.
Cultural momentum continues to be a long-term driver for cannabis stocks and is just part of the reason why we remain bullish and are beating the cannabis index.
Cabot Cannabis Investor has delivered several excellent trades in the past month.

* Back on October 31 I was very bullish on the cannabis group which was weak because of the nomination of Rep. Mike Johnson (R-LA) as House speaker. He has always opposed cannabis legislation. I argued there were several other catalysts in the mix regardless of how Congress acted on legal reforms. “Cannabis stocks are a strong buy in the weakness,” I wrote.

I suggested any of the names in our portfolio, or the AdvisorShares Pure U.S. Cannabis (MSOS) exchange-traded fund (ETF) and the leveraged version, AdvisorShares MSOS 2x Daily (MSOX), for simplicity. “I am adding to MSOS and MSOX in the weakness, and I will continue to add, particularly if they get weaker from here.” Since October 31, here’s how those trades have done.
Political brinksmanship and dysfunction have derailed the summer’s rally in cannabis stocks, but despite muddy political waters, there are still catalysts to fuel a resurgent rally.