The market’s larger, longer-term trend remains up, and the odds are that the market will be higher later this year. But short-term, the market remains in a correction, and marijuana stocks, as a whole, are not fighting the trend.
Still, our portfolio is in great shape, currently 19% in cash, and the prospects for the industry remain spectacular.
The biggest news for the portfolio this week was the Nasdaq listing of OrganiGram (OGI), a move that reliably brings new investors to the table. In this case, it sent the stock to new highs.
Other than that, there’s been nothing big. But I do like the action of Village Farms (VFF) recently, so now the portfolio will average up. Details below.
Aphria (APHA) Aphria remains the cheapest of the Canadian major producers, and the portfolio remains underweight in the stock, looking to average up once the uptrend resumes. Hold.
Aurora Cannabis (ACB) Aurora, another Canadian major, has a healthier chart, now in a two-month basing formation (to be kind) that is looking heavy, and the stock remains expensive. If the market worsens, the current correction has the potential to carry the stock to its 200-day moving average down around 7.5.
Canopy Growth (CGC) Canopy, which is even more expensive than Aurora, remains the hands-down leader in the industry. Today it announced the acquisition of another company to bring under its global canopy, This Works, a London-based skincare and sleep solutions company with a “devout customer base” spanning 35 countries. The company’s best-known products include deep sleep pillow spray, morning expert hyaluronic serum and skin deep dry leg oil (all its product names are in lower case). Looks like a great outlet for CBD. The price was $58 million in cash.
As for the stock, CGC remains in the base-building pattern (trading between 40 and 52) that began in late January, with its 200-day moving average, now at 42, providing some assurance that the stock is unlikely to fall much lower from here. If you’re not invested, or you’re looking to average up, you could nibble here.
Cresco Labs (CRLBF) Down in the U.S., Chicago-based Cresco is one of the leading vertically integrated multi-state operators, with the potential to be one of the U.S. industry leaders in years to come. The stock appears moderately valued, and is acting fine, consolidating in a range centered on 12 since early April. Also, its 50-day moving average is now at 11.5, so could lend support. The portfolio remains overweight in CRLBF. Note: I featured the stock in Cabot Stock of the Week yesterday, so if you don’t own it, you could buy some here.
Cronos Group (CRON) Canadian Cronos remains the most overvalued stock in the portfolio (thanks to all the investors who followed Altria on board) and the stock remains under pressure, getting close to its 200-day moving average at 13.6. The portfolio is underweight, but looking to average up when the uptrend resumes. In fact, one reader wrote today asking if yesterday’s strength might be the signal to get back in, and I replied, “I’ve had the same optimistic thought, and I certainly am looking to average up sometime, but I’m not convinced it’s bottomed yet. I want to see strength from ACB and APHA as well to confirm a new group uptrend.” All three stocks closed below their 25-day moving averages yesterday.
Curaleaf Holdings (CURLF) Massachusetts-based Curaleaf is now the most highly valued of the U.S. multistate operators, with the potential to be one of the leaders years from now. The portfolio is overweight the stock. Last week I wrote, “risk-averse investors might get lucky by waiting for a dip to the stock’s 50-day moving average, now at 9.3.” and we’re almost there. If you’re not in yet, and you’re underinvested, you could buy some now, but more prudent investors will wait to see group indicators, like those 25-day moving averages mentioned above, turn up. Trying to pick bottoms is risky.
Elixinol (ELLXF) CBD company Elixinol is lower-priced and thus more volatile, but it’s trending up and heading for its old high of 4.2, hit in early April. Aggressive investors and traders can jump in here. CBD is now legal under U.S. federal law, so there are institutions that would not invest in marijuana that will instead invest in CBD.
Green Thumb Industries (GTBIF) This Chicago-based multi-state operator is the second most valuable of the U.S. players, and the stock is beginning to worry me, as it keeps drifting lower (albeit on average volume). But our loss is acceptable, and if the stock doesn’t find support at 12 (which would require a reversal today), the next stop is 11, a level that provided strong support in January.
HEXO Corp. (HEXO) Second-tier Canadian producer HEXO looks fine, riding its 25-day moving average slowly higher, though trading volume is shrinking. Last week I suggested new investors could buy some, but now, with the stock and sector weakening slightly, I’ll just say hold. If the market gets rough, the stock has the potential to fall to 6.
Innovative Industrial Properties (IIPR) Cannabis REIT Innovative Industrial Properties has been a great diversification play for the portfolio, and as I write, the stock is just above both its 25- and 50-day moving averages, so it’s healthy. If it fits in your portfolio, I recommend trying to buy under 80.
On Monday the company announced the acquisition of a property in Saxton, Pennsylvania, which comprises two buildings totaling approximately 266,000 square feet, for $13 million, which will be leased to Green Leaf Medical as a medical-use cannabis cultivation and processing facility. This brings the company’s property count to 21 properties in 11 states.
KushCo Holdings (KSHB) KushCo is an enabler. It makes packaging—like childproof containers—does marketing and sells industrial gases to cannabis processors. But it doesn’t touch the plant, so its business is legal across the U.S. As for the stock, it remains in the consolidation pattern that began a long 16 months ago, bounded by 4 on the downside and 8 on the upside. It’s been good for diversification, and if the sector weakens further, I expect KSHB to hold up better, since it’s so reasonably priced, but if it doesn’t get going when the sector uptrend resumes, I’ll let it go.
Organigram (OGI) Last week I mentioned that Organigram also looked cheap, relative to its Canadian cannabis peers, and that the stock was holding up extremely well, ripe for a breakout to new highs. Well, the stock did break out last Thursday, and then on Friday, the company announced that the stock would start trading on the Nasdaq Global Select Market under the symbol “OGI” on Tuesday May 21. This elevation to Nasdaq status has been a reliable trigger for new money to enter marijuana stocks, and the pattern held with OrganiGram, with big volume on Thursday, Friday and Monday pushing the stock higher before it reversed course yesterday. But now that the surge is over, what next? The pattern says now the stock will digest that gain for a while, perhaps months. Thus traders could take profits here. Long-term investors should hold.
Turning Point Brands (TPB) TPB is the old smokeless tobacco company diversifying very successfully into the cannabis industry—but not plant-touching. The stock remains above all of its moving averages, digesting the gains from its excellent first quarter report. If you don’t own it, and it would fit your portfolio, you can nibble here.
Village Farms International (VFF) Village Farms is a major (and profitable) grower of greenhouse tomatoes, peppers and cucumbers that is fast transitioning into the cannabis industry—both marijuana (in Canada) and hemp (in the U.S.). Valuation seems good to me; in fact the basic story seems much like that of Turning Point Brands.
The stock reacted very nicely to the company’s first-quarter report two weeks ago, gapping up on big volume and pulling back normally since. Our initial investment, just over a month ago, was light, so now we will average up, doubling the position.