This update will be brief but clear.
The cannabis sector is still in correction mode ... looking for a bottom somewhere.
And now the broad market is selling off as well, partially because of fundamental reasons like tariffs, but also because after rising 20% in seven months, it’s normal to have a correction. How long it will last and how far it will go, we don’t know. But our game plan remains unchanged, and I think that generally we are well positioned today, with the portfolio 31% in cash.
Following are updates on two stocks: Aphria (APHA), which reported earnings last week, and Charlotte’s Web (CWBHF), which has been unusually strong—and in which we will now take some quick profits.
Aphria (APHA) Aphria reported fiscal fourth-quarter results last Thursday after the market close.
Net revenue was $128.6 million, up 75% from the prior quarter and 969% from the prior year.
Net income was $15.8 million and adjusted EBITDA was $0.2 million.
The company is on track for annual production capacity of 255,000 kilograms when all facilities are fully licensed.
And, in a reminder that they haven’t forgotten their roots, the company’s subsidiary Marigold Projects Jamaica Limited “received a retail Herb House license from Jamaica’s Cannabis Licensing Authority to open its first store at the Peter Tosh Square ... overlooking the Peter Tosh Museum in New Kingston, Jamaica.”
The market loved the news, particularly the positive earnings, and bid the stock up Friday on huge volume, sending it right back up to the base that it had built in May and June. This is good, and we will hold tight. If you don’t own it, wait a while for a real uptrend to be established.
Charlotte’s Web (CWBHF) Charlotte’s Web, meanwhile, has no material news, but the stock has been unusually strong. One factor may be the company’s deal with Kroger, to carry Charlotte’s Web CBD in 1,350 store locations in 22 states. But another factor may be the strong endorsement of the stock by another investment advisory service. In any event, the advance looks be running out of gas as it approaches its old April high of 25. Plus, without the support of the rest of the cannabis sector—and with the broad market weakening fast as well—the odds are that this can’t continue. Long term, I remain very bullish on the stock. But short term, I think this is a profit-taking opportunity. The portfolio will now sell half its position in CWBHF.
Note: Charlotte’s Web will release its 2019 second-quarter results on August 14 before the market open.