Just a brief update today with a couple of portfolio changes.
The strength in marijuana stocks that began two weeks ago with breakouts by the stocks of the four leading U.S. providers has continued this week, so now I’m going to take the portfolio to a fully invested position.
But first I’m going to sell Akerna (KERN), the software stock that never got going and that now presents us with an intolerable loss. Happily, it was only a small pilot position—which got even smaller.
The proceeds from that sale plus the portfolio’s remaining 8% cash will be split equally, used to average up in current holding Cresco Labs (CRLBF), which looks great, and to establish a new position in GW Pharmaceuticals (GWPH), profiled below.
At that point, we’ll be overweighted in all the major U.S. multi-state producers, as well as GrowGeneration (GRWG), our hydroponics and organic gardening aggregator—which also looks healthy, having broken out to a new high yesterday.
Note: The table reflects the state of the portfolio holdings before acting on any new recommendations.
GW Pharmaceuticals (GWPH)
Headquartered in the U.K., GW in 2019 received approval to sell its drug Epidiolex, which is derived from marijuana, to treat infant epilepsy. Since then the drug has been approved for use in other conditions characterized by seizures and spasticity. The German market opened to the company in late 2019 and France, Spain and Italy are expected later this year—with the U.S. following eventually. GW’s second drug, Nabiximols, is also derived from marijuana and already approved in 25 countries outside the U.S. for treatment of spasticity due to multiple sclerosis. Down the road, other target indications include post-stroke, cerebral palsy and PTSD. In the first quarter, revenues were $121 million, up 207% from the year before. There are no earnings yet, but analysts expect earnings of $0.43 per share in 2021. As for the chart, it looks much like the rest of the marijuana sector, though less volatile, and that’s due to both the steadiness of the business and the high price of the stock, which tends to keep out the unsophisticated investors that are moving so many low-priced stocks these days. GWPH broke out to a new high two weeks ago and has consolidated that gain nicely since. The buyers are in control.
The next full issue of Cabot Marijuana Investor will be published on July 29, 2020.