The Tide Has Started Flowing in Again–But Will It Last?
Let’s start this brief update with a few simple charts, courtesy of New Cannabis Ventures.
The dip in April in Massachusetts was due to marijuana stores being declared “nonessential.” Aside from that, it’s clear that business is booming across the U.S. in states where marijuana is legal. And there’s no doubt in my mind that the trend will continue.
Where I do have doubt is the question of our stocks’ direction.
Eight weeks ago as marijuana stocks topped, I began selling and taking profits and that’s worked out well. We’ve lost less than the index, as the correction took down first marijuana stocks and then all stocks. At the same time, our strongest stocks have gained.
But over the past week, both the general market and parts of the marijuana market have been strengthening, and now I think the odds are decent that we have a good upward leg ahead, running at least to election day.
So what I’m going to do today is put a little money into the strongest stocks—and if the strength continues, we’ll add more in the days ahead.
First, I’ll commit 4% of the portfolio (roughly half a position) to TerrAscend (TRSSF), which I’ve mentioned before. It’s smaller than our current four U.S. marijuana producers, but growing fast. And then I’ll double our investment in Innovative Industrial Properties (IIPR), which has just broken out to a new high.
As for the other stocks, some time ago, I ranked our stocks by strength, and some readers have requested that I do that again, as it provides a rough guide to attractiveness. So here you go.
At the top is Innovative Industrial Properties (IIPR), which continues to sign real estate deals with marijuana companies across the country. The old adage says, “Hitting new highs the most bullish thing a stock can do.”
Second is GrowGeneration (GRWG), our hydroponics supplier, which never fell to its 50-day moving average. GRWG is the largest position in the portfolio by a good margin.
Third is Turning Point Brands (TPB), which had me concerned just last week. The stock did fall briefly through the support at 28 that I’d mentioned, but buyers quickly stepped in (we like to say the weak hands were then out) and then the company announced that it had acquired a 20% stake in Wild Hempettes, the leading manufacturer of hemp cigarettes, and that brought a bigger wave of buying.
After that come three of the four leading U.S. marijuana companies: Cresco Labs (CRLBF), Green Thumb Brands (GTBIF) and Trulieve (TCNNF). All three stocks are below their 50-day moving averages (which are all still moving up) but trending higher.
Then comes the other U.S. marijuana stock, Curaleaf (CURLF), which I rank lower than the others because its 50-day moving average has just begun heading down.
And last is our remaining Canadian stock, Canopy Growth (CGC), which is the smallest position in the portfolio.
In general, the key to success is to own more of the strongest stocks and less of the weakest. So as the days go by, I’ll continue watching all these stocks carefully (plus other contenders) and if the strength continues, we’ll buy more!
FYI, as of today, our portfolio is up 15.8% YTD while the Marijuana Index is down 15.7%.