The good news is that leading marijuana stocks have seen some heavy buying in recent days—so much, in fact, that the four leading U.S. marijuana stocks have all broken out above their May or June highs.
The bad news is that the leading technology stocks in the market, like Netflix, Nvidia, Tesla and Zoom Video, have just entered into a well-deserved correction, so it’s possible that the cooling off there will spread to the marijuana sector.
But so far it hasn’t, and with all Cabot’s market timing indicators still positive, I continue to recommend that you be heavily invested in the leading stocks in this fast-growing industry, particularly the four leading U.S. companies—three of which comprise our portfolio’s largest positions.
For the record, these four are Cresco Labs (CRLBF), Curaleaf (CURLF), Green Thumb Industries (GTBIF) and Trulieve Cannabis (TCNNF).
Marijuana Index
Here’s the index, continuing to recover from its two-year bear market—though held back a bit these days by the Canadians.
And here’s the portfolio.
Note: The table reflects the state of the portfolio holdings before acting on any new recommendations.
Portfolio Strategy
I’ve frequently written that owning the leading U.S. vertically integrated multi-state operators is the best long-term strategy, because five years from now, they will almost certainly be bigger and more profitable. And that strategy has been very rewarding over the past week, too. But I also like the diversity provided the Canadians and peripheral U.S. companies, so for the foreseeable future, they will continue to be part of the portfolio. Today I have no recommended changes, just updates on the action of each of our stocks.
Akerna (KERN) KERN, bought just a month ago, is now our biggest loser, and thus a candidate for sale. But the stock is testing support right here, and selling volume has faded, so the odds are fair that it will bounce from here. HOLD.
Aphria (APHA) The leading Canadian producer, APHA surged with the U.S. producers yesterday (on big volume) and has held up pretty well today. It still hasn’t broken out above its June peak, but it is my favorite Canadian. BUY.
Canopy Growth (CGC) CGC is the old Canadian leader that is now one of our smaller positions. Long-term, all should be well, but at the moment, with it still trading right on its slowly advancing 50-day moving average, I can’t rate it a buy, simply because there are better-acting stocks. HOLD.
Cresco Labs (CRLBF) CRLBF spent more than two weeks trading below its 50-day moving average—at which point I downgraded it to Hold—but the stock surged with its peers Friday and Monday, breaking out above its June highs, so if it can keep acting well (say, not fall back below 4.5), I’ll likely upgrade it to buy. HOLD.
Cronos Group (CRON) CRON is a secondary Canadian producer, and now a small part of the portfolio, but it still seems to be worth holding, as its 50-day moving average is trending slowly upward. HOLD.
Curaleaf Holdings (CURLF) When its acquisition of Grassroots closes next week, CURLF will be the leading marijuana producer in the U.S. That’s one reason it’s the strongest stock among the U.S. producers, as well as the largest position in our portfolio. However, I’m not particularly keen on buying at this moment (the stock is up 33% in three days), so if you haven’t bought yet, I suggest waiting for at least some consolidation. BUY.
Green Thumb Industries (GTBIF) Chicago-based GTBIF broke out of a beautiful base on Friday and has continued higher since. If you don’t own it yet, you could nibble here. BUY.
GrowGeneration (GRWG) Our hydroponics garden center company (focused on serving the marijuana industry) hasn’t seen its stock break out with the producers, but it is healthy nevertheless, bouncing off its 25-day moving average today and heading back toward its old high (7.82). If you want some diversification from the plant-touching companies, this is a good choice. BUY.
Innovative Industrial Properties (IIPR) This cannabis-centric REIT is also a great source of diversification (and yield), trading just under its 25-day moving average and 10% off its high. If you don’t own it, you can buy here. HOLD.
Tilray (TLRY) TLRY, sadly, remains weak. Fundamentally, the Canadian company has great prospects for growing its many international connections, but investors today don’t seem to care. TLRY is now the second-smallest position in our portfolio (which seems appropriate), and if it can’t hold up above support at 7, I’ll probably let it go. HOLD.
Trulieve (TCNNF) Two weeks ago, TCNNF was in a calm and solid base, trading quietly at its 50-day moving average. But today it’s seen three big up days, and it’s now one of the strongest stocks in the group. I think it’s a little extended to buy here, so if you don’t own it, you should wait for a pullback or consolidation. BUY.
Turning Point Brands (TPB) TPB is actually the slowest-growing company in the portfolio, measured by revenues—and sometimes it marches to a different drummer. Today, it’s not only broken out above its May and June highs, it’s also above its March high! BUY.
WATCH LIST
4Front Ventures (FFNTF) – Two weeks ago I wrote, “the chart is encouraging,” and now it’s broken out above its May high! However, it’s still trading well under a dollar and I don’t like the risk down there.
Planet 13 Holdings (PLNHF) – This is interesting; PLNHF ignored the group’s strength until today, when it gapped up at the open—but it’s still below its June highs.
The next full issue of Cabot Marijuana Investor will be published on July 29, 2020.