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.
We may soon see the Drug Enforcement Agency (DEA) publish a proposed rule on cannabis rescheduling to Schedule III from Schedule I, as recommended by the Department of Health and Human Services. Otherwise, we could see news on SAFER banking in Congress since politicians are talking about progress there again.
For general sector exposure, I suggest considering the AdvisorShares Pure U.S. Cannabis (MSOS) exchange-traded fund, or its leveraged twin, AdvisorShares MSOS 2X Daily (MSOX). For targeted exposure, consider any of our portfolio names (below).
Also consider selling MSOX May 17 puts with a strike price of 3 for income. I believe these puts are likely to expire worthless. Otherwise, barring disastrous news for the sector, you’d be getting an attractive price if ETF shares got assigned to you, effectively at 2.80 (strike price minus the current premium you’d collect by selling). Please note that options entail heightened risk.
Portfolio names are: Ayr Wellness (AYRWF), Cresco Labs (CRLBF), Curaleaf (CURLF), Cronos (CRON), AdvisorShares Pure U.S. Cannabis (MSOS), AdvisorShares MSOS 2X Daily (MSOX), ETFMG Alternative Harvest (MJ), Green Thumb (GTBIF), Organigram (OGI), Tilray Brands (TLRY), Trulieve (TCNNF) and Verano (VRNOF). For simplicity, consider getting exposure via MSOS or the leveraged version MSOX.
I’ll have more detail in the full issue of Cabot Cannabis Investor to be published on April 24.
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