Note: Yesterday I did a 40-minute webinar on cannabis, covering both marijuana and CBD as well as a few of our stocks. Some of the content will be familiar to you, but some will be new. If you’ve got time, check it out.
News
The big news today is that all of Cabot’s market timing indicators are once again positive. Partial thanks, of course, goes to the Fed, which now suggests that more rate cuts are in the future. But there’s no need to over-analyze it; the market’s main trend is once again up, and you should be investing to take advantage of it.
However, not all marijuana stocks are on board for the ride. Many of our stocks seem stuck in the mud—not bad, but not blasting off like some of the market’s leading stocks. Also, looking at the Marijuana Index, we see that it’s now come back down to where it was in mid-January.
Part of this weakness may be due to the failure of marijuana legalization efforts in both New Jersey and New York, but again, we don’t need to over-analyze it. Instead, we simply need to recognize trends and respond to them, while keeping in mind, of course, our long-term goal of owning the marijuana stocks that will be the industry leaders five and 10 years from now.
Thus, after careful consideration of all I learned at the conference last week, after a careful review of all 144 cannabis industry stocks I am now tracking, and after careful consideration of the 14 stocks currently in our Marijuana Portfolio, I will now make three changes to the portfolio, selling partial positions in Green Thumb Industries (GTBIF), Innovative Industrial Properties (IIPR) and KushCo Holdings (KSHB). These actions will raise our cash level to about 24%.
Details are below, along with a profile of one possible new addition to the portfolio. I’ll have a full issue for you, with updates on all stocks, next week.
Green Thumb Industries (GTBIF) —The most common mistake made by beginning investors is holding losers too long, often in the hope that they will get back to breakeven. I talked with a subscriber this week who had bought a marijuana stock at $3 and held it as it declined steadily to below $1. That’s too big a loss!
GTBI is now a 22% loss for us and despite the bounce in recent days, I still can’t say the trend is up. Fundamentally, all seems well at the company, but if investors aren’t bidding the stock up, I don’t want so much of it. The portfolio will now sell half its position. SELL HALF.
Innovative Industrial Properties (IIPR) — Cannabis REIT Innovative Industrial Properties has been a huge success for the portfolio, exceeding all expectations, and just last week the company announced a second-quarter 2019 dividend of $0.60 per share, representing an approximately 33% increase over its first quarter dividend of $0.45—and a huge 140% increase over its second-quarter 2018 dividend of $0.25. As the only REIT in the cannabis space, helmed by an experienced management team, the long-term prospects remain bright for IIPR. However, the stock is now greatly out of trend to the upside (its 50-day moving average is 32% below today’s price), and we have become a bit overweight in the stock, so I’m now going to sell a third of our position and hold tightly to the rest. SELL A THIRD.
KushCo Holdings (KSHB) — This packaging company’s stock continues to look heavy; it bounced off a low at 4, but hasn’t been able to establish any upward momentum. The buyers just aren’t there. I’ve long liked the stock for the diversification it adds to the portfolio, and the company is growing at a good pace, but the fact is, the stock hasn’t made any progress in more than a year. We will now sell half. SELL HALF.
WATCH LIST
MediPharm Labs (MEDIF) — My thorough review of the industry turned up this interesting stock. Based in Ontario, MediPharm is the leading independent extraction company in Canada, producing purified, pharma-grade cannabis oil and cannabis concentrates for advanced derivative products. Thus, it could benefit substantially when Canada legalizes vapeables and edibles, sometime this fall. First-quarter revenue was $22 million. The stock has been building a base at 4 through all of June, and if it can begin an uptrend from here, I could add it to the portfolio. This morning, however, the stock is down.