Good News/Bad News
The good news is that 2019, which started off so well for the cannabis sector but is ending so poorly, is nearing the finish line. The bad news is that we still have three weeks to go, technically, though many of those days will see light trading volume.
The good news is that we’ve beaten the index handily this year; the Marijuana Index has lost a whopping 46.5% YTD. The bad news is that we’ve lost money, too, with the portfolio down 17.5% as I write.
The good news is that 2020 will bring great new opportunities for the industry, as Cannabis 2.0 kicks off in Canada and increasing numbers of U.S. operators take advantage of scale and experience to post real and growing earnings. The bad news is that the U.S. Federal government remains woefully behind the times, so true national operations are still a dream.
But what we can do is invest in the greatest prospects, focusing on stocks that are not only above their mid-November lows but actually revealing true buying power, and if we don’t finish 2019 with a profit (it’s still very possible), the odds are quite good that—coming off this sector low—there will be big profits in 2020.
So, below are updates on the stocks in the portfolio. I’ll be at the MJBizCon conference in Las Vegas Wednesday through Friday, and will surely have a lot to share with you next week!
Aphria (APHA) Aphria is currently the largest holding in the portfolio, for several reasons. It’s the biggest seller in Canada. It’s not as overvalued/overexposed as Canopy. And its chart is looking constructive, having bottomed below 4 in mid-November. HOLD.
Aurora (ACB) Aurora should be a major force in Canada, but right now, its stock remains weak. The portfolio holds a minimal position. HOLD.
Canopy Growth (CGC) CGC is the most high-profile Canadian cannabis company, and the stock remains expensive relative to its peers. But the good news is that it now has had two big waves of buying power—the first in mid-November and the latest starting Monday when the company announced that David Klein, currently CFO of Constellation Brands (STZ), has been hired as the company’s new CEO, effective Jan. 14, 2020. The portfolio holds a minimal position, but could average up if true momentum develops. HOLD.
Cresco Labs (CRLBF) Chicago-based Cresco Labs has great prospects, but a cash crunch has weighed on the stock, which remains below all its moving averages. HOLD.
Cronos Group (CRON) Cronos, too, remains under all its moving averages and the portfolio remains underweight. HOLD.
Curaleaf Holdings (CURLF) Curaleaf is the portfolio’s second largest position, in part because the valuation looks good relative to its peers, and the stock is above both its 25- and 50-day moving averages. If you don’t own any, you could buy some here. HOLD.
Green Thumb Industries (GTBIF) This Chicago-based MSO’s stock has been basing since late August and its 50-day moving average is close to turning up. If you don’t own it, you could buy some here. BUY.
Innovative Industrial Properties (IIPR) IIPR is the REIT that currently owns 42 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, Ohio and Pennsylvania, totaling approximately 2.9 million rentable square feet—all of which it leases to cannabis companies. The portfolio took profits in the stock four times this year, and started buying back in last week. If you want relatively low risk exposure to the cannabis industry, consider grabbing some shares. BUY.
MediPharm Labs (MEDIF) This company a major Canadian extractor and the portfolio’s most recent addition, but it hasn’t held up where we bought it; instead, it’s headed for its old low of 2.5—which would be tolerable if it finds support there. HOLD.
Organigram (OGI) New Brunswick-based OrganiGram made some mistakes in its growing protocols this year, but it’s since corrected them, so prospects for 2020 are better. Interestingly, the stock is pretty much back to where it was when we added it to the portfolio in 2017. Happily, we’ve taken profits of 129%, 137% and 13% since then, and are now a bit underweight. HOLD.
Trulieve (TCNNF) Trulieve remains the strongest stock in the entire cannabis universe, by far, as investors impressed by the company’s profitable scaling up of operations in Florida have swarmed into the stock. The portfolio would like to average up, but I’d like to see the sector as a whole turn up first, and the stock to have a decent correction. Still, I’ll leave it on Buy for investors ambitious enough to tackle it. BUY.
Turning Point Brands (TPB) Turning Point Brands is a well-managed company with a long history of selling other tobacco products, like snuff and chewing tobacco. It pays a small dividend too, currently 0.7%. And its 25- and 50-day moving averages are both trending up! Granted, it won’t be a rocket-shot, but it does provide nice diversification. BUY.