Please ensure Javascript is enabled for purposes of website accessibility
Cannabis Investor
Profit from the Best Cannabis Stocks
After another month of dramatic declines in March, cannabis stocks showed a little more stability in April.

This is encouraging, even though it is never really possible to “call the bottom” in out-of-favor groups.

How out of favor is cannabis? I’ve invested through three bear markets, and I don’t think I have ever seen a group as unloved as cannabis is now. Remember, this is a good thing if you are a contrarian investor looking for bargains, as long as the group in question is not a value trap. (Like the declining newspaper industry years ago, a value trap that Warren Buffett got caught in.)
Many of the underlying trends in cannabis continue to be favorable even if this is not reflected in the stock prices, which are down sharply this month.

States continue to advance legalization of recreational use. Lawmakers remind us that federal regulatory reform in banking remains on the table, and will get taken up by key Congressional committees this year. Europe should begin to advance recreational use legalization within the next several weeks, starting with Germany. Cannabis sector insiders are stepping up to buy stock. Industry consulting firms continue to affirm robust sales growth projections of 13% a year through 2027. There are tentative signs that price compression is neutralizing.
Though cannabis sector sentiment is extremely dark because of price compression and lingering bitterness after the December drubbing, there are several reasons to be bullish on the group.

This suggests that it’s a good time to add to cannabis names as a contrarian investment. Warren Buffett tells us that the market should serve us, rather than influence our moods. If I am right about the underlying bullish trends, the market is serving up an opportunity in cannabis. But you have to look at this as a medium-term play.

We know about all the negativity in the space – declining wholesale prices, overproduction, the failure of politicians to get the ball over the line in banking reform in December. But what about the positives?
We are back in earnings season again. This season tells us more about our companies, but it also helps us get a read on sector trends.

Let’s start with a look at takeaways on key sector trends from the quarterly earnings call by executives at Organigram (OGI). This Toronto-based company serving Canada, Israel and Australia may be small, with a market cap of $300 million. But its executives know the space as well as anyone, and they offered the following insights.
Cannabis stocks and exchange-traded funds (ETFs) are ending the year at their lowest levels ever, and everyone knows exactly why. Sector investors were let down by lawmakers in Washington, D.C. who had suggested they’d secure approval of favorable banking reform by year-end while they still had the votes. This reform would have been a game changer since it would provide cannabis companies access to banking services and maybe even listings on major exchanges.
The high-growth cannabis sector continues to be full of rapidly evolving developments that could move our stocks significantly at any moment.

Beyond the potentially transformative changes in the works on legalization, almost all our companies just reported solid third-quarter revenue growth.

That means this issue of the Cabot SX Cannabis Advisor focuses heavily on corporate trends and developments in the company update section, below. The updates are longer than usual, covering the key news events and developments at our companies revealed in quarterly results and other news flow.
Election season lurks just around the corner.

The looming midterm outcomes have huge implications for cannabis – since the group is so dependent on legal reform in the hands of politicians.

There are going to be plenty of (tradeable) election-related ups and downs. But for reasons I will explain, cannabis stocks might see some very bullish catalysts near term, no matter which party takes the Congressional elections.
Sentiment remains extremely negative towards the cannabis sector and the overall stock market.

You can look at this situation and get depressed. Or you can see it as an opportunity to buy cheaper shares for the long term. Being a contrarian, I prefer to do the latter. I think both cannabis stocks and the broad market are buyable right now. And that’s why I am adding two new positions to the Sector Xpress Cannabis Advisor portfolio today, and rate all our existing stocks “Buys.”

In recent months I’ve been telling you that cannabis stocks were incredibly cheap and overdue for a bounce, and now it seems the world is starting to agree, as all our cannabis operators have seen their stocks climb in the past month.

Of course, the broad market’s rebound has helped, but the broad market doesn’t have the compelling fundamentals of the cannabis industry’s top stocks.

Bottom line: while the first six months of 2022 were rough, that’s history, and we are now on the path toward renewed profits as the leaders of this growth industry see their stocks come under accumulation once again—and we wait patiently for federal legalization.

Full details in the issue.

In recent months I’ve been telling you that cannabis stocks were incredibly cheap and overdue for a bounce and now it seems the world is starting to agree, as all our cannabis operators (not the REIT) have seen their stocks climb in the past month.

Of course, the broad market’s rebound has helped, but the broad market doesn’t have the compelling fundamentals of the cannabis industry’s top stocks.

Bottom line: the first six months of 2022 were rough. The past month brought us a small gain. And I expect far bigger gains over the remainder of the year.

Full details in the issue.

Yours for wealth and wisdom.

If there is one message I want you to take home from today’s issue, it’s that cannabis stocks are cheap. Really cheap. And they may never be this cheap again.

So if you’ve got some cash sitting around that you want to “risk” in a long-term investment, consider the stocks I’ve rated buy.

In the meantime, our portfolio, which has beaten the index in each of the past four years, is 58% in cash, waiting patiently for the turn.

Full details in the issue.

Yours for wealth and wisdom.

It’s been a tough year for investors in cannabis stocks, and in the broad market as well, as all major indexes are in downtrends.

Yet prospects for the cannabis industry remain bright, as state-by-state legalization trends continue.

But until trends turn up, there’s no urgency to buy, so our portfolio sits roughly half in cash, waiting for the upturn.

Full details in the issue.

Yours for wealth and wisdom.

Cannabis stocks rose sharply in early May on news that Congress is getting serious again about allowing banks to serve cannabis companies. The Senate banking committee will hold hearings on the favorable bank reform May 11.

The reform bill, called the Secure and Fair Enforcement (SAFE) Banking Act, was recently refiled by a bipartisan group of lawmakers in both branches of Congress. The co-sponsors were: Sens. Jeff Merkley (D-OR) and Steve Daines (R-MT), and Reps. David Joyce (R-OH) and Earl Blumenauer (D-OR).
The cannabis sector remains under pressure. But the stock price weakness makes the group a good buy for contrarians because there are plausible catalysts on the horizon.

Let’s be clear. It won’t be easy to buy. It never is, when sentiment is so dark.

Buying right never feels good, as the saying goes. When the right time to buy comes along, you won’t want to, is how technical analyst Walter Deemer puts it.
Here are the latest developments in the cannabis sector over the past two weeks.

The bottom line: States continue to march forward with legalization, but the negative trends of price compression and higher financing costs weigh on weaker players. That will create acquisition opportunities for the stronger companies in the space.
Throughout U.S. history, federalists and states’ rights advocates have battled it out. Federalists believe in strong centralized power. The other side wants issues to get resolved locally. Federalists are usually on the left, and states’ rights advocates are normally conservatives. But not always. It depends on the issue.
Cannabis stocks continue to get weighed down by the SAFE banking debacle. As you recall, late last year legislators failed to approve cannabis sector banking reform called the SAFE Banking Act that would have made it easier for banks to serve cannabis companies.
Cannabis stocks are getting sold down as if the industry has no future.

This makes no sense, but there is a good explanation. Traders and investors bought the group heavily on expectations that cannabis sector banking reform would be passed in Congress by year’s end. The AdvisorShares Pure U.S. Cannabis (MSOS) exchange-traded fund (ETF) saw five to ten times normal volume on four days in early December, following two months of accumulation.
Yesterday I suggested adding $40,000 of our cash to AdvisorShares Pure US Cannabis (MSOS) with a buy limit of 11.45.
Today I am adding $40,000 of our cash to AdvisorShares Pure US Cannabis (MSOS) with a buy limit of 11.45.
Monday’s big, sharp market pullback was shocking to some investors, and scary enough to cause many to sell stocks in the fear that the correction would go deeper. It certainly might—the September/October period often brings major corrections—and maybe it should, though should is a word that I try to avoid when writing about the market.
Fundamentally, all is well in the marijuana sector as the industry’s leaders continue to grow, both organically and by acquisition. The average rate of revenue growth for the plant-touching companies in our portfolio in the most recent quarter was an amazing 132% from the previous year.
Most of our stocks continue to build bases, so I remain patient, waiting for a renewed advance by the sector. The standout stock in our portfolio is Innovative Industrial Properties (IIPR), which broke out to a new high last week after a great report.
Cannabis stocks are screaming higher this morning. Our AdvisorShares Pure US Cannabis (MSOS) ETF is up over 8%. Three of our portfolio names are up even more, 9% to 15%.
Election results set up some key potential catalysts for our cannabis stocks, both near term and further down the road.

Above all, a Republican takeover of control of the House of Representatives increases the odds that we will see very near-term passage of favorable banking reform, known as the Secure and Fair Enforcement Act, or SAFE Banking Act.
Back on October 7 intraday, I recommended selling our entire position in Tilray Brands (TLRY) at 3.47; our entire position in ETFMG Alternative Harvest ETF (MJ) at 5.48; $7,000 of Curaleaf (CURLF) at 6.33; and $7,000 of Green Thumb (GTBIF) at 13.35.
Our cannabis stocks rose nicely yesterday on news that President Biden has asked the Justice Department (DOJ) and the Department of Health and Human Services (HHS) to review marijuana’s federal scheduling status.
Greetings. I’d like to intro myself as the new editor of Cabot Sector Xpress Cannabis Advisor.
Thanks to the huge 17-month downtrend that ended in late June, cannabis stocks are all very good values today. The best ones to buy are the ones that have been trending up since early July. Those are rated buy below.
The good news today is that the bottom seems to have passed, for both the broad market and stocks in the cannabis sector. The S&P 500 was down 25% at the bottom, while the cannabis index was down 84% at the bottom—and for both, that seems enough.
For many months, I’ve been telling you what a bargain the leading cannabis stocks have become, and now it appears that increasing numbers of investors have come to the same conclusion, as selected stocks have lifted off their bottoms, with some even climbing above their 25-day moving averages.
Patience is a valuable attribute for sailors who are waiting for the wind to change. And patience is a key attribute for long-term investors. Investors who are impatient are the ones who sell at the bottom and then sit on the sidelines as stocks move back up.

So patience is what I continue to counsel for readers with losses in the stocks in our portfolio.

There’s no doubt about it: this market stinks.

Every major index has been hitting new lows, the news is terrible (raging inflation and soaring interest rates), and investors have grown increasingly fearful, as the profits of 2021 have quickly evaporated in the bear market of 2022.

Given that today’s date is 4/20, I feel compelled to acknowledge that that’s the code for “time to smoke pot.” But I don’t have any jokes. This is serious business. And it’s doubly serious because we’ve been dealing with a weak sector for over a year!

The only bright spot in that trend is that valuations have become more attractive; if this goes on long enough, I expect Cabot’s value analyst Bruce Kaser will recommend one of these stocks!

The good news today is that the broad market is looking healthier than it has in many months, thanks to a resurgence by growth stocks.
The bad news is that we still can’t say that cannabis stocks are truly in an uptrend yet—but they might be!