Good morning. Overall, cannabis/marijuana stocks still look fine, even though the stocks were generally soft yesterday, so I’m not doing a full update, but there has been action, both good and bad, in a few stocks worth mentioning.
CannTrust (CTST) CannTrust is the one “bad” stock. Since we bought last Thursday (the highest day of the week, no pun intended), we’re now down 25%, mainly because of a big drop yesterday. The reason for the drop was that the company announced the sale of more stock, with the proceeds to be used to grow more quickly.
I don’t like sitting with a loss of 25%, and the rule of cutting losses short could certainly apply here, especially if the stock is a significant investment for you. However, the main sideways chart pattern of the past year remains; the reason for the decline is known, plus, we are still underweight the stock. Thus, I will hold.
Charlotte’s Web Holdings (CWBHF) Charlotte’s Web announced the hiring of the former President of the U.S. Snacks division of Kellogg Company as Chief Executive Officer. Sounds good. CBD on your Corn Flakes?
Curaleaf Holdings (CURLF) Curaleaf, which is big on the East Coast, announced an agreement to acquire the cannabis business of Cura Partners, owners of Select, the biggest brand on the West Coast, in what they claim will result in the biggest cannabis business in the U.S. The companies had combined revenues of more than $200 million in 2018, and significant cost synergies are expected. The stock hit a new high on the news. The portfolio is overweight the stock.
Turning Point Brands (TPB) Turning Point is the old smokeless tobacco company diversifying into the cannabis industry (but not plant-touching), and the stock is once again hitting new highs, thanks to an excellent first-quarter earnings report that revealed how well the transition is going—new generation products (non-tobacco) accounted for 47% of revenues in the quarter. Also, the stock is still cheap relative to most stocks in the marijuana sector.
Note: Our Cabot Marijuana Investor portfolio is now up 51.4% year-to-date, while the Marijuana Index is up 36.9%.
If the weakness that began yesterday continues, we will certainly sell stocks (reducing position sizes) to raise cash and preserve profits, but it’s too early to contemplate that yet. The deals being done tell us that money continues to flow into the sector.