Cabot Cannabis Investor Issue: April 30, 2025

Cannabis stocks continue to post sharp rallies on rumors of progress on federal policy developments like banking reform and rescheduling. Then the stocks give it all back over the next day or two.

There are two ways to deal with this trend.

1) Trade it. I’m not much of a trader. But if you are, it makes sense to try to trade these moves. The daily swings can be in the 5% to 10% range. If you do this, keep core positions because there could be surprise news of progress in Washington, D.C., at any moment. We don’t know when.

But you don’t want to be out of the sector when big rescheduling news hits the tape, like today. Terrance Cole, President Donald Trump’s pick to lead the Drug Enforcement Administration (DEA), today said rescheduling cannabis will be one of his first priorities. “The process has been delayed numerous times, and it’s time to move forward,” he said during his confirmation hearing before the Senate Judiciary Committee. I am not selling this rally because I am not a trader. But it could fade over the next few weeks without further bullish news.

2) Otherwise, have the discipline to avoid chasing cannabis stocks in rallies, and instead accumulate on the down days. This is what I am doing.

One reason to buy weakness is that several favorable trends and potentially good catalysts remain in the mix. But the sector is so hated, they are not getting priced in. I recently caught up with the CEO at our Chicago Atlantic Real Estate Finance (REFI), Peter Sack, and the chief investment officer at our Verano (VRNOF), Aaron Miles, for sector updates.

Here are seven key highlights from our conversations. There’s more detail on many of these trends in the “Cannabis News from Around the World” section below.

1) Rescheduling and banking reform remain on the table, but it is impossible to predict when they will happen.

“From what we are hearing, there is positive momentum at the federal level,” says Miles, at Verano. “We are still hearing that rescheduling is a big priority for this administration.” His company has a dedicated lobbyist in Washington, D.C., and it also collaborates with one of the main cannabis lobbying groups.

“But there is so much uncertainty. President Trump could wake up and focus on cannabis, or this could play out over a longer period of time.” Miles thinks the SAFER Banking Act reform could be introduced in the near term.

“It all falls on the shoulders of one person, Donald Trump,” says Sack. “I have no insight if it will happen in twelve months or thirty-two months.” At least he is not ruling reform out.

President Trump endorsed both rescheduling and banking reform in his election campaign. Rescheduling would be key because it would obviate IRS rule 280E, which blocks cannabis companies from deducting operating expenses. That would boost cash flow. The rule prohibits deductions against sales of Schedule I substances like cannabis. Rescheduling would move cannabis to Schedule III, where 280E does not apply.

2) Price compression is leveling off, but it is a slow process, and the trends are state-specific.

“Eventually there is consolidation and companies go out of business,” says Sack, at Chicago Atlantic. “But that does not happen immediately. It happens through a process of a lot of pain, and we are in the middle of it. It is market by market. It happens faster in some places and slower in others.”

Recently, he says, wholesale prices were firming up in Oregon, Colorado, Arizona, Nevada, Pennsylvania, Maine, Delaware and Illinois. “That’s extremely encouraging. Some of the markets are starting to reverse some of the trends that have soured commentary on the space.”

Overall, as of the week of April 25, the price per pound rose to $974 from $955 the prior week, according to Cannabis Benchmarks. The forward pricing curve implies slight gains to $985 later this year. That’s not a lot, but it is better than the persistent declines that have plagued the sector.

“We are seeing prices level out in certain states,” agrees Miles, at Verano. “We are starting to see stabilization in Florida, Illinois and New Jersey,” he says. This trend is not getting priced in to cannabis stocks. “The normalization of the market is overlooked,” says Miles.

3) Cannabis exposure to tariff damage is generally low.

While some companies may get caught up in a trade war because they get significant revenue from cannabis exports from Canada to Israel and Europe, most cannabis companies have limited exposure to tariffs.

“Our borrower exposure to tariff risk is low,” Chicago Atlantic’s CEO tells me, referring to companies his business lends to. “The market is domestic, and only a small portion of the cost structure is imports.” Miles says tariffs would only have a limited impact on business at Verano.

4) In a recession, cannabis sales may hold up the way sales of alcohol and cigarettes do, but there could be some damage to margins.

Sack, at Chicago Atlantic, says it is tough to know because the legalized cannabis business has never been through a recession. “Should cannabis be compared to alcohol, cigarettes and pharmaceuticals? I do not know.” But he suspects cannabis sales may hold up because it will remain a more economical alternative to other forms of entertainment. However, consumers could trade down from premium products. That could weigh on cannabis company profit margins.

The core customer and medicinal users won’t cut back, predicts Miles. “Cannabis has a very loyal customer base, especially medical,” he says.

5) Recreational-use legalization in Florida is still very much on the table.

“We remain very positive on Florida,” says Miles. “They want cannabis to be legalized,” he says, referring to the results of public opinion polls and the 56% approval of a legalization referendum last year (short of the 60% needed for approval). “What the state wants will happen over the next couple years.” He says recreational use legalization will likely be on the ballot again in 2026.

6) Pennsylvania will legalize recreational-use sales at some point.

One reason is that Pennsylvania is surrounded by states that have legalized, so residents are paying cannabis sales taxes elsewhere. “They are definitely losing a lot of tax revenue that is going to other states. They have all the incentives in the world to get it done,” says Miles. “There is a good chance it will happen. Governor Josh Shapiro has been very vocal about cannabis.”

7) Hemp-derived cannabis products remain vulnerable to policy changes at the state and federal level, but in the meantime, they are introducing new consumers to THC.

“Hemp is bringing consumers into the space who have not gone into dispensaries,” says Miles. Hemp-derived drinks, for example, are now sold in liquor stores in many states.

What to Do Now

Cannabis investors remain uncertain about when reform like rescheduling will happen. It is not possible to predict this with any accuracy. So, patience is required. It makes sense to make the wait easier with a “get paid to wait” strategy, which emphasizes cannabis sector lenders that pay rich yields. They will still post some capital appreciation if reform progresses.

Our Cabot Cannabis Insider portfolio now has three of these. They are: Advanced Flower Capital (AFCG), Chicago Atlantic Real Estate Finance (REFI) and Chicago Atlantic BDC (LIEN). They pay yields of 14.6%, 12.2% and 12%, respectively.

In dividend investing, yields like these are often considered “too high” and a sign they cannot last. At least as of the most recent updates, it does not appear these dividends will be cut. All have recently affirmed their dividend payouts.

Otherwise, continue to hold or average down in our main portfolio names. The best time to buy stocks is when they are widely hated, but plausible catalysts lie on the horizon. That is clearly the case with cannabis stocks now. But this is also the hardest time to buy stocks. That resistance may also be a signal to buy. As a general rule, some of your best stock purchase decisions will be the ones that are the hardest to make.

Consider taking both trading positions and multi-year positions in portfolio names now, or averaging down. I am personally averaging down in the current weakness.

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.

Cannabis News from Around the World

Part of my core thesis for being bullish on cannabis stocks is that there continues to be tremendous cultural momentum toward cannabis reform around the world. I’m convinced institutional investors will not ignore cannabis stocks forever.

We see evidence of this powerful cultural momentum in the changes in laws to legalize cannabis, big tobacco investments in the space, robust cannabis sales growth in states that legalize, increased cultural acceptance in the form of relaxed drug testing standards in sports leagues and the workplace, and poll results that show a growing majority of people support legalization regardless of age and party affiliation.

These trends tell us cannabis stocks are a strong contrarian buy that will turn very profitable for patient investors with a medium-term horizon. The sector is so volatile, it is easy to get shaken out of names by heightened emotional reaction to drawdowns. So, it is important to catalogue evidence of this cultural momentum. That is the purpose of this section of Cabot Cannabis Investor.

Federal Reform News

* President Donald Trump has been urging members of Congress to pass a cannabis banking reform bill before the 2026 midterm elections, according to a recent report in the Marijuana Herald. The report cites two senior Senate staffers.

A Democratic-controlled Senate banking committee approved the Secure and Fair Enforcement Regulation (SAFER) Banking Act in 2023, but it went nowhere. Trump backed cannabis banking reform during his election campaign.

* The US Cannabis Roundtable (USCR) lobbyist David Culver recently said in a media interview that he believes President Donald Trump still intends to reschedule cannabis under the Controlled Substances Act. The timing remains impossible to predict given Trump’s mix of priorities, he says.

* A bipartisan group of lawmakers has reintroduced a bill that would end federal prohibition in states that have legalized cannabis. Called the Strengthening the Tenth Amendment Through Entrusting States (STATES) 2.0 Act, the bill would eliminate section 280E of the IRS tax code, which blocks cannabis companies from deducting operating expenses. The bill would also legalize some forms of interstate cannabis commerce. The bill was filed by Reps. Dave Joyce (R-OH), Max Miller (R-OH) and Dina Titus (D-NV).

* Lawmakers recently reintroduced a bill asking the attorney general to create a panel to offer guidelines on a regulatory system for cannabis if it ever gets legalized. The panel would draw on federal and state alcohol regulations to make recommendations on how to regulate cannabis. It would suggest rules on matters like product safety, labeling, crop production, sale, and interstate commerce.

The Preparing Regulators Effectively for a Post-Prohibition Adult-Use Regulated Environment Act (PREPARE) Act was reintroduced by Rep. Dave Joyce (R-OH) and House Minority Leader Hakeem Jeffries (D-NY). “Currently, nearly all 50 states have legalized or enacted cannabis to some degree, bringing us closer to the inevitable end to federal cannabis prohibition,” said Joyce. “The PREPARE Act delivers a bipartisan plan.”

* Tariffs will have a limited impact on cannabis companies. The biggest exposure will come from vape carts, typically imported from China. But vape carts represent only 5% to 9% of wholesale operators’ costs, says Anthony Coniglio, CEO of Newlake Capital Partners (NLCP), a cannabis sector real estate investment trust. Another limiting factor is that companies in the sector are not expanding capacity. So, they have little exposure to any eventual increases in the cost of construction material and equipment caused by tariffs. “They are unlikely to substantially affect our sales and costs,” said Tilray (TLRY) CEO Irwin Simon in the company’s April earnings call.

* Former Rep. Matt Gaetz (R-FL) thinks a coalition of libertarian-leaning Republicans and Democrats could legalize cannabis at the federal level, but only if Democrats drop their push for the redistribution of cannabis tax revenue into minority communities. Gaetz made the comments on “The Matt Gaetz Show” earlier this week. Gaetz was President Donald Trump’s first pick for U.S. attorney general.

* Doctors for Drug Policy Reform (D4DPR) has dropped its lawsuit against the Drug Enforcement Administration (DEA), which had alleged DEA bias in witness selection and improper communications with cannabis reform opponents.

D4DPR said it dropped the suit in part to avoid further rescheduling delays.

The DEA has a key role in advancing rescheduling, but documents revealed by the D4DPR suit confirmed the agency has an anti-reform bias. A court granted D4DPR’s motion to dismiss without prejudice, which means D4DPR can resume the case if the DEA drops the ball on rescheduling.

Moving cannabis to Schedule III from Schedule I under the Controlled Substances Act would hand cannabis companies lots of cash by allowing them to deduct operating expenses. Currently, IRS rule 280E prevents the deduction of operating expenses against revenue from the sale of Schedule I substances, like cannabis.

State News

*It’s round two in Florida. Trulieve Cannabis (TCNNF) has contributed $19.6 million to the recreational-use lobbying group Smart & Safe Florida. The group wants to put a rec-use legalization referendum on the 2026 ballot. Trulieve put about $145 million into the effort last year. The rec-use legalization effort fell slightly short of the 60% voter support needed for approval.

* Yet another poll finds that a majority of Pennsylvanians support the legalization of recreational-use cannabis. Opposition to the change has fallen by almost 50%, to 21% of people, in the past ten years. The survey was done by the Muhlenberg College Institute of Public Opinion.

* After a slow start, New York’s cannabis market is finally taking off. The state tripled the number of stores last year. They sold $869 million worth of cannabis in 2024. The state ended the year with 260 stores.

* Minnesota’s Office of Cannabis Management (OCM) recently announced the final rules for the state’s recreational-use market. This clears the way for the OCM to start issuing sales licenses. The OCM is offering up to $2 million to help farmers get up to speed on cultivating cannabis.

* Medical cannabis sales in Kentucky could start by late summer or during the autumn, says Governor Andy Beshear. Kentucky’s legalization of medical use is part of a growing trend of cannabis use gaining more acceptance in Southern states.

* A Texas appeals court recently gave a green light to a state lawsuit challenging local referenda that decriminalize cannabis, a growing trend in the state.

The state’s 15th Court of Appeals overturned the decision by a lower court judge who had tossed out a lawsuit from Texas Attorney General Ken Paxton (R) to block Austin’s voter-approved decriminalization. Paxton argues state law trumps local decriminalization ordinances. “The State has an intrinsic right to enforce its own laws and, therefore, has standing to bring this suit,” said the 15th Court of Appeals. The case will now go to trial.

The Texas Senate recently approved a bill that would prohibit cities from putting initiatives on local ballots that would decriminalize cannabis. Cannabis activists are trying to get a decriminalization initiative on the ballot in Kyle this November.

* Southern states continue to warm up to cannabis. The University of Mississippi (UM) recently announced it will operate the Resource Center for Cannabis and Cannabinoid Research (R3CR). The center will support research on cannabis efficacy and offer guidance to researchers on regulatory compliance and research standards.

* Legal cannabis is increasingly popular in Utah. The number of medical cannabis cardholders was up 18% in April compared to the year before, reaching nearly 100,000.

* North Dakota Gov. Kelly Armstrong (R) recently signed a bill legalizing cannabis edibles for registered medical cannabis patients. The move expands permitted medical-use form factors beyond products flower, tinctures, capsules and topical patches.

* Kansas may be inching towards medical cannabis legalization. Governor Laura Kelly (D) recently supported a bill that would allow people with severe rare diseases to use investigational and experimental drugs. Senate Bill 250 is called the “Right to Try for Individualized Investigative Treatments Act.”

“It’s time for the Legislature to finally legalize medical marijuana, giving the Kansans suffering from chronic pain or post-traumatic stress disorder, and children suffering with Dravet’s Syndrome (epilepsy) the choice of the treatment they and their doctors determine best suits their needs,” she said. Another bill, called Senate Bill 294, would also permit medical cannabis use.

* New Hampshire Senators recently tabled House-passed bills that would have legalized cannabis, allowed medical cannabis patients to grow plants at home, and allowed dispensaries to buy hemp-derived cannabinoids on the commercial market.

Hemp-based THC Product Trends

* Several states are pushing back on legal hemp sales. Some are merely trying to enact sensible regulation. Some are attempting to levy taxes similar to current taxes on cannabis product sales. Others are attempting to ban hemp-based products altogether.

The popularity of hemp products is important to the sector and our portfolio companies for a couple of reasons.

First, hemp-derived products compete with products sold by our portfolio companies. On the other hand, several of our portfolio companies like Curaleaf (CURLF) and Trulieve Cannabis (TCNNF) are getting on board by rolling out hemp-based products of their own, mostly beverages.

Next, hemp products introduce new customers to THC use. This means people who would rarely visit a dispensary but are OK with picking up a hemp-derived drink in their liquor store.

Hemp-derived THC is legal in the U.S. under the 2018 U.S. Farm Bill. Federal legalization of hemp-based products could change, depending on the whims of federal lawmakers. Most states allow hemp-based products, but that status is evolving, as you can see below. Here is a roundup of recent developments.

* The Texas Senate recently approved a bill that cannabis advocates say would effectively eradicate the state’s hemp industry by prohibiting hemp-based products that contain any amount of THC.

* A Florida House committee recently approved a proposal that would put a 15% tax on hemp-derived THC products. The bill would also severely limit the amount of THC in hemp products. Gummies, for example, could only have two milligrams of THC. Gummies typically have 10 milligrams to 20 milligrams.

* The Tennessee House and Senate have approved a bill preventing the sale of hemp containing THC content over 0.3%. This is effectively a ban on hemp-derived cannabinoid tetrahydrocannabinolic acid (THCA). THCA provides a cannabis high when heated through smoking or vaping. Heating converts THCA to delta-9 THC, the active ingredient in cannabis.

* Indiana lawmakers are advancing a bill that would regulate hemp-derived THC products. The bill would set age limits and establish guidelines for licensing, packaging and testing. Notably, the bill stops short of banning the products.

* North Carolina lawmakers are advancing over half a dozen bills that would regulate the sale of hemp-based products. Most of the bills would ban purchases by people under 21 and require stores to have sales permits. These bills also stop short of banning hemp products.

Sector Trends

* Annual sales of cannabis edibles will grow to $54 billion by 2034 from $12.3 billion last year, driven by shifting consumer preferences, looser regulations, and product innovation, predicts ResearchAndMarkets.com.

“As legalization spreads, more consumers are exploring cannabis edibles as an accessible, discreet, and convenient consumption method,” says a recent report from the group, called “Cannabis Edibles Market Opportunity, Growth Drivers, Industry Trend Analysis, and Forecast 2025-2034.”

“Regulatory shifts continue to open new opportunities, making cannabis edibles more widely available,” says the report. “The adoption of favorable policies has played a pivotal role in destigmatizing cannabis and increasing its acceptance across diverse consumer demographics.”

The U.S. cannabis edibles market is the biggest, at $10.6 billion in sales last year, or 86% of overall sales.

* Most vapes and gummies supposedly derived from hemp contain risky cannabinoids produced through chemical synthesis, says a recent study. The study says exposure to synthetic cannabinoids or byproducts of chemical synthesis can pose health risks. Delta-8-THC and delta-9-THC were the most common synthetically derived cannabinoids.

But researchers also found potent novel cannabinoids such as THCP and HHC. Some products contained kratom, hallucinogenic mushrooms, or similar psychoactive substances. The study was conducted in California by the San Diego and Imperial Counties Joint Labor Management Cannabis Committee.

* About 15% of U.S. adults use cannabis, and 7.9% use it daily. Most people (79.4%) prefer to smoke it, while 41.6% report using edibles, 30% report vaping and 14.6% report dabbing.

That’s according to a recent Centers for Disease Control and Prevention (CDC) analysis of 2022 federal data on cannabis use among thousands of U.S. adults. The report drew on data from the Behavioral Risk Factor Surveillance System, an annual phone survey of people 18 and older.

International News

* Lawmakers in Slovenia have introduced a bill that would legalize cannabis for medical use and scientific research. The measure was introduced by the Freedom Movement and The Left parties. It would remove cannabis from Slovenia’s list of illegal drugs. The Freedom Movement says it also plans to take steps to try to legalize recreational use.

* Canadians consumed more cannabis after legalization, but misuse of the drug declined slightly. Consumption overall increased 1.75% over five years. But there was a decline in misuse identified under the Cannabis Use Disorder Identification Test Revised (CUDIT-R).

“From a public health standpoint, these results are mixed,” the report says, “as increased use might be considered harmful, while decreased misuse is a positive outcome.” The study was done by the American Medical Association. Canadian recreational use sales began in October 2018.

Medical News

* A giant meta-analysis of over 10,600 peer-reviewed studies found “overwhelming scientific consensus” that cannabis has therapeutic value in medicine, especially for cancer. The study also concluded that cannabis can have “profound” anti-inflammatory effects.

Various studies found that cannabis helps manage cancer-related symptoms and that it might even have some anticarcinogenic effects. Inflammation contributes to the development of many illnesses.

“This is one of the clearest, most dramatic validations of medical cannabis in cancer care that the scientific community has ever seen,” said Ryan Castle, head of research at Whole Health Oncology Institute, which helped do the research.

The meta-analysis found that for every study that showed cannabis was ineffective, there were three studies that showed it had therapeutic value. “That 3:1 ratio, especially in a field as rigorous as biomedical research, isn’t just unusual, it’s extraordinary,” says the study.

Researchers said their findings support moving cannabis to Schedule III from Schedule I, which is reserved for substances with no perceived medical value. President Donald Trump campaigned in favor of rescheduling, which would free up a lot of cash flow by obviating IRS rule 280E. The rule blocks the deduction of operating expenses.

One drawback is that researchers used sentiment analysis to figure out the tone of research, which authors acknowledge is not always accurate. The Chopra Foundation in New York helped carry out the study. The study was published in the journal Frontiers in Oncology.

* A recent survey of nurses in long-term care facilities found that 85% of them think cannabidiol (CBD) reduces seizures among patients with epilepsy. They also reported that Epidiolex, a plant-derived CBD, improved patient sleep, cognition, communication and physical functioning. The study was published in the journal Neurology.

* Cannabinoids and THC demonstrated significant anticancer activity against bladder cancer cells in lab studies done outside the body. “These results underscore the therapeutic potential of CBC- and THC-rich C. sativa extracts in the bladder cancer treatment,” concluded the authors. The study was published in the Asian Journal of Urology.

* Cannabinoids reduce the severity of tics and premonitory urges in Tourette Syndrome, a behavioral disorder characterized by motor and phonic tics, says a recent meta-study. The study was published in the journal Neurology.

Portfolio Company News

Curaleaf (CURLF)

Curaleaf in April opened a medical cannabis store in Winter Park, Florida, and a hemp-derived product store in West Palm Beach, Florida, called Hemp Company by Curaleaf West Palm Beach.

Green Thumb (GTBIF)

Green Thumb opened a RISE Dispensary in Ocala, Florida, in late April.

Tilray (TLRY)

Tilray April 8 reported $185.8 million in fourth-quarter sales, compared to $188.3 million in the prior year. On a constant currency basis, revenue was $193 million, or up 2%. Revenue would have been $206 million, adjusting for one-off strategic actions like product line rationalization.

The company reported a huge net loss of $793.5 million in the third quarter compared to a net loss of $105 million in the prior-year quarter. This was a loss of $0.87 per share, compared to $0.12 per share in the prior-year quarter.

However, the huge fourth-quarter loss was largely due to $700 million of non-cash impairment. Zeroing out the impairment, adjusted net loss was $2.9 million in the third quarter compared to an adjusted net income of $0.9 million in the prior-year quarter. Adjusted earnings per share was zero in the quarter, the same as the prior-year quarter.

The company reduced debt by $58 million in its fiscal year to date. Tilray ended the quarter with $248 million in cash. Net debt is less than one times EBITDA. This positions Tilray for acquisitions and investment in growth, CEO Irwin Simon said in the call.

Tilray, in mid-April, announced that it started offering its Good Supply Pastilles medical cannabis edibles in Australia.

On June 10, Tilray will ask shareholders to vote on a proposed reverse stock split in the 1-to-10 to 1-to-20 range.

Trulieve Cannabis (TCNNF)

Trulieve Cannabis opened a store in St. Petersburg, Florida, on April 11.

Sector Performance

Our Cabot Cannabis Plus Insider Portfolio is doing very well. But our plant-touching Cabot Cannabis Investor portfolio has been weak, along with the sector.

Our Cabot Cannabis Plus Insider Portfolio invests in cannabis-related names that do not touch the plant, where insiders are buying. The stocks are up 27% on average, since they were introduced.

The portfolio is well positioned to outperform because investments in AFC Gamma (AFCG), Chicago Atlantic Real Estate Finance (REFI) and Chicago Atlantic BDC (LIEN) pay yields in the 11% to 17% range. The dividends were recently confirmed, even though they look suspiciously high. We will also see capital appreciation in these names if sector catalysts hit.

Because our plant-touching cannabis portfolio is leveraged, it suffers in sector downturns. That is the case now. Our Cabot Cannabis Investor portfolio cannabis portfolio was down 26.6% this year as of the April 29 close, compared to a decline of 31.9% a month ago.

I can’t compare our portfolio to the New Cannabis Ventures Global Cannabis Stock Index, because that tracking service is down for the moment.

Our plant-touching portfolio is leveraged because of the large position in AdvisorShares MSOS 2X Daily (MSOX). It is a top-five position. The leverage hurts us when the sector is weak. Likewise, it helps capture more upside as we see progress on rescheduling cannabis, and progress towards approval of recreational use in more large states like Pennsylvania.

When we get a significant sector rally, I will roll back leverage by trimming MSOX in favor of cannabis stocks or the AdvisorShares Pure U.S. Cannabis (MSOS) ETF. If you are a highly active trader, it would make sense to deleverage into rallies in the same manner along the way and then hope for a pullback to re-lever.

Note that we are not running a New Cannabis Ventures Global Cannabis Stock Index chart because it is unavailable. I have contacted the site, and it should be back soon.

Portfolio

Canna Plus Insider Portfolio

Company Profiles

Ayr Wellness (AYRWF) This is a vertically integrated multistate operator based in Miami. It has over 90 dispensaries. It operates in Florida, Illinois, Massachusetts, Pennsylvania, New Jersey, Nevada, Ohio, and Connecticut. Ayr has 18 grow and production sites, around a dozen national brands, and a proprietary library of over 160 cannabis strains. Like many names in our portfolio, Ayr is strategically positioned in states that look poised to approve recreational-use sales. It has over 60 stores in Florida, for example.

Ayr has built out its brand development strength with the appointment of David Goubert as president and CEO. Goubert previously served as president and chief customer officer at Neiman Marcus Group, and he was at LVMH for 20 years before that.

Ayr is currently launching brands from its national portfolio in New Jersey, including Ayr’s Lost in Translation flower, Kynd flower, Road Tripper flower, STIX pre-rolls, Entourage vapes, Secret Orchard vapes, and Wicked soft lozenges.

Ayr recently reported $71 million in cash and $607 million in net debt. This debt overhang is one reason why Ayr trades at 0.15 times sales. The company is founder-run, which can be a plus in investing. BUY

Cresco Labs (CRLBF) Chicago-based Cresco has the #1 market share position in Illinois, Pennsylvania and Massachusetts. The company has the top-selling branded portfolio of cannabis products in the industry. It has the top of branded flower and branded concentrates, and the third best portfolio of branded vapes.

Cresco offers exposure to many attractive U.S. markets with an emphasis on Illinois. It is also in Pennsylvania, Ohio, New York, Massachusetts, Michigan, Florida, Missouri, and Maryland. Most of those are states that recently expanded into recreational use sales, or are expected to over the next two years.

The company is founder-run, which can be a plus in investing. Cresco Labs has a price to sales ratio of 0.55. BUY

Cronos Group (CRON) Cronos is mainly a foreign operator with exposure to Canada, Germany, Australia and Israel.

Cronos has respectable brand strength in Canada. It sells gummies, infused pre-rolls and vapes under the Spinach, Blue-Raspberry Watermelon and Tropical Diesel brands. Spinach products command 15.3% market share in the Canadian edibles category, and 19.8% share in gummies, according to Hifyre.

In Israel, Cronos sells dried flower, pre-rolls and cannabis oils in the medical market. The company has a partnership with Cansativa Group which allows Cronos to sell its Peace Naturals brand in Germany, where the cannabis market should grow dramatically over the next several years because of liberalization of restrictions on sales. Cronos has a 10% stake in Cronos Australia, a publicly traded company.

Cronos has $855 million in cash, or about $2.24 per share, against minimal debt of $2.26 million. Some of that cash could be deployed in acquisitions, possibly to expand in the U.S. adult-use market.

Cronos trades at 0.75 times book value. BUY

Curaleaf (CURLF) Massachusetts-based Curaleaf was the industry leader last year. It operates 145 dispensaries and several grow sites in 17 states and its European operations. It has one of the strongest brand portfolios in the U.S. led by Select, the number one selling vape brand in its markets. Here are three factors that support growth.

1. Curaleaf is an R&D powerhouse. A team of scientists is currently developing about 180 products.

2. Like many of the names in our portfolio, Curaleaf is well positioned to benefit from the opening up of rec-use sales in New York, Ohio, Florida, Pennsylvania near term.

3. Curaleaf will benefit from progress on liberalization of cannabis laws in Germany and elsewhere in Europe. It has a majority stake in Germany’s Four 20 Pharma, a licensed producer and distributor of medical cannabis that has more than 15%-20% market share in Germany. Curaleaf International is the largest vertically integrated cannabis company in Europe. It has a lot of room to expand production, and it boasts import and distribution in the U.K., Germany, Italy, Switzerland, and Portugal. Recreational use legalization in Germany is advancing, and it could open the floodgates to further legalization throughout Europe. Curaleaf has a 50% market share in the U.K.

The company is founder-run, which can be a plus in investing. Curaleaf has a price/sales ratio of 1.07. BUY

AdvisorShares Pure U.S. Cannabis ETF (MSOS) This exchange traded fund (ETF) has large exposure to most of our portfolio names so it may seem redundant. However, I want to put it on your radar as a liquid trading vehicle for getting in and out of the group without having to make a lot of individual stock sales, and as way to get exposure to many of our names with one purchase. It also gives us diversification beyond our names, to positions like Jushi Holdings (JUSHF) and Innovative Industrial Properties (IIPR), among others. Consider accumulating this ETF on weakness of 2% or more. BUY

AdvisorShares MSOS 2x Daily ETF (MSOX) This is the leveraged version of the ETF MSOS. It theoretically goes up (and down) by twice as much as MSOS, though the relationship does not always hold exactly. Consider accumulating on weakness of 2%-4% or more. Note that leveraged ETFs suffer from some persistent valuation decay because of the cost of the leverage. BUY

ETFMG Alternative Harvest (MJ) This ETF has outsized foreign exposure, which means it could benefit more than other marijuana exchange traded funds if we see progress on legalization in Germany and Europe. That could happen in the form of draft legislation and decriminalization of recreational use in 2023. “Legalization in Germany could be a tipping point for global expansion,” according to cannabis experts at ETFMG. This would put additional pressure on other European Union members to move forward with legalization. It could also encourage reform of the 1961 U.N. Single Convention on Narcotics which prohibits the cultivation and sale of recreational cannabis. “Such a result would be momentous and would open the doors to a global market,” says ETFMG. Owning this ETF broadens our industry exposure to names outside our portfolio, like Canopy Growth (CGC; WEED.TO), SNDL (SNDL), and GrowGeneration (GRWG), among others. BUY

Green Thumb (GTBIF) Chicago-based Green Thumb is our portfolio’s largest position. It has been the most profitable multistate operator of all the big ones – a sign of good management.

Green Thumb branded cannabis products include &Shine, Beboe, Dogwalkers, Doctor Solomon’s, Good Green, incredibles and RYTHM. The company operates a national retail cannabis stores called RISE. Green Thumb has 91 dispensaries across fourteen states. Green Thumb continued to strategically position itself in markets that look poised to expand to recreational uses sales, like Florida and Pennsylvania.

Founder Ben Kovler is chairman and CEO. Research shows that founder-run companies often outperform. Kovler has a 26% stake in the business and holds nearly 59% of voting power. Green Thumb trades at a price to sales ratio of 1.93. BUY

Organigram (OGI) Organigram holds the #2 position among Canadian licensed producers. It also sells high-margin flower in Israel, Australia and Germany. Germany should see robust growth over the next few years as it loosens rules on medical cannabis use. The CEO has alluded to “creative ways” to get into the U.S. cannabis market, but does not offer details.

The company has the #1 market share position in hash globally driven by popular products like Tremblant, Holy Mountain and SHRED. It has the #1 market share position in gummies.

British American Tobacco (BTI) is a big investor in Organigram, an endorsement of its potential. The two companies collaborate to develop cannabis products. The price to sales ratio is 1.1. BUY

Tilray Brands (TLRY) Tilray is a cannabis and consumer packaged goods company with one of the biggest global footprints in the industry. CEO Irwin Simon founded The Hain Celestial Group, a natural food company, which is in the business of brand development. This is a key factor for cannabis companies, too. So, the Hain Celestial experience may bode well for shareholders.

Tilray is a big recreational and medicinal cannabis supplier in Canada. It is ranked #1 there by sales for cannabis flower, oils, concentrates, and THC beverages; #2 in pre-rolls, #4 in vape, and among the top 10 in all other categories. It also offers medical cannabis in 20 countries on five continents through its subsidiaries and agreements with pharma distributors. It has operations in Canada, the United States, Europe, Australia and Latin America. It sells craft beer and CBD products in the United States.

Tilray seems like a good play on expected legalization of recreational use in Europe over the next few years, because it has been making significant investments there. It has a medicinal marijuana distribution network in Germany. It has production facilities in Portugal and Germany, the largest medical cannabis market in Europe.

Tilray sells hemp food products through its Fresh Hemp Foods division, and it has a craft alcohol business called SW Brewing, the tenth-largest craft brewery in the United States. The price to sales ratio is 1.38. BUY

Trulieve (TCNNF) Trulieve has long been the biggest medicinal marijuana vendor in Florida, where it has 50% market share. It has over 190 dispensaries and two thirds are in Florida. Cannabis activists are trying to get recreational use on the Florida ballot in November 2024. A win would be huge for Trulieve. Approval could make Florida the largest legal U.S. cannabis market with 22 million residents and 138 million tourists a year.

Meanwhile, Trulieve has been expanding across the country. It is diversifying its presence into Pennsylvania, Maryland, Georgia, Ohio and Massachusetts, among other states.

The company reports $320 million in cash against $795 million in debt. “U.S. cannabis has significant white space ahead, with many states yet to implement medical or adult-use programs, and the growing appetite for substantive federal reform,” says CEO Kim Rivers. It has a price to sales ratio of 0.98. BUY

Verano (VRNOF) Chicago-based Verano is one of the top five publicly traded multi-state operators in the U.S. by sales. Verano has nearly 140 dispensaries and 14 production facilities in 13 states. One of the most attractive qualities of this company is that it has a big presence in high-growth markets like New Jersey, Illinois, Florida and Connecticut, and states that may soon legalize recreational like Florida and Pennsylvania. The company’s strategy has been to position with medical dispensaries in states most likely to soon go recreational.

The company’s portfolio of brands includes Encore, Avexia, MÜV and its signature Verano line of product. To capitalize on the consumer’s trading down to value brands, Verano moved up the rollout of a new budget line called Savvy last year. It operates dispensary concepts called Zen Leaf and MÜV. It also has a licensing agreement with Mike Tyson’s Tyson 2.0 cannabis company.

The company reports cash of $194 million against debt of $541 million.

Verano is founder-run, which can be a plus in investing. Verano has a price to sales ratio of 0.54. BUY

The next Cabot Cannabis Investor Issue will be published on May 28, 2025.

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