Nine weeks ago, as the marijuana sector was completing what looked like a climax top, I took the risky step of taking partial profits in ten of our stocks, moving to a 45% cash position.
Since then, as the correction has unfolded, I’ve sold three times more, moving to what is now a 64% cash position.
By holding cash in the correction, our portfolio’s YTD profit is now 32.5%—not as high as it was nine weeks ago, but better than the Marijuana Index, which is now up just 15.5%.
And now It’s time to buy again.
A careful study of the charts, combined with ongoing measuring of investor sentiment, tells me now that the sellers seem to have run out of power, and that the buyers will likely take charge next—though it’s hard to say exactly when.
But given that the broad market is still healthy, with major indexes hitting new highs very recently, and that the Marijuana Index is now a massive 48% off its high (our average stock is off 24%), it seems very likely that the marijuana sector will attract buyers around these levels.
So today I’m going to put half our cash back in.
Specifically, the portfolio will now buy equal dollar amounts of current holdings Cresco Labs (CRLBF), Curaleaf (CURLF), Green Thumb (GTBIF), GrowGeneration (GRWG), TerrAscend (TRSSF) and new addition Columbia Care (CCHWF), which I’ve written about before.
Note: I’m not buying any Canadian marijuana stocks at the moment. Recent quarterly results reveal an ongoing problem with excess capacity in Canada, which has led to falling prices. In the U.S., by contrast, quarterly results continue to show triple-digit revenue growth relative to 2020.
I’m not buying any more of current portfolio marijuana producers Jushi (JUSHF) and Trulieve (TCNNF) because their charts are a bit weaker than average and the portfolio has been a bit overweighted in Trulieve.
And I’m not buying more Innovative Industrial Properties (IIPR) and Turning Point Brands (TPB) because those are our slower-growing peripheral companies, and I don’t expect them to do as well as the “pure” marijuana stocks.
As always, we’ll take it day by day from here, listening to the charts and thankful for the opportunity to invest in this fast-growing industry.
Moving on, there were two substantial news items since my last update.
Last Thursday, Canopy Growth announced an agreement to acquire Supreme Cannabis, a smaller Canadian producer whose 7ACRES brand will be added to Canopy’s stable.
And just yesterday, Trulieve announced that it acquired Solevo Wellness West Virginia and its three West Virginia dispensary permits, an acquisition that solidifies Trulieve’s position in the newly created West Virginia market.
As I said earlier, we’re not buying either of those stocks today, because we’re trying to maximize our short-term gains, but I have little doubt that both companies will be long-term winners.