Time for a Little More Buying
The big news this week is that Amazon will no longer screen most job applicants for marijuana use. Plus, the giant is supporting federal marijuana legalization. That’s one more step in the right direction.
Additionally, the final two quarterly reports from our portfolio holdings are in:
Canopy Growth (CGC) yesterday reported good results for the quarter ended March 31 (technically the firm’s fourth quarter of fiscal 2021). Revenues grew 38% to $148 million, while losses continued, though management projected a turn to positive EBITDA in the second half of 2022. Canopy had the #1 market share of flower in Canada in the quarter, with over 19% of the market. It had the #3 market share of the vape market in the quarter. It captured 35% of the THC beverage category during the year. And its Quatreau CBD beverages, launched during Q3 2021, have captured the #1 market share since launch. Meanwhile, in the U.S., the company’s Martha Stewart brand CBD products are a top-nine brand among all CBD supplements in the food, drug and convenience-store channel. In short, trends are good and the future is bright. As for the stock, it’s been quite weak since peaking in February at 56, but buyers stepped in in late May (on big volume) and my interpretation is that the downtrend is finally over for CGC—which means buying is possible here.
Cresco Labs (CRLBF) last week released its first quarter report under U.S. GAAP standards, paving the way to uplist to a major exchange when legal. Revenues were $178 million, up 169% from the year before, while losses continued, though management noted adjusted EBITDA of $35 million. Operationally, Cresco is the largest wholesaler in the U.S., has the #1 market share in two of the industry’s top-five states, and continues to grow by acquisition. In fact, CEO and co-founder Charlie Bachtell commented, “We laid the groundwork in Q4 and Q1 and now our expertise with integrating new assets and producing operating leverage will kick in.” As for the stock, it’s pretty much average for this group, trading above its late-March low and right on both its 25- and 50-day moving averages—so a solid hold.
Portfolio Changes
With last week’s sale of the last of our longtime holding Turning Point Brands (TPB), the portfolio has 31.5% of its assets in cash, and that’s too much for a sector that is looking increasingly healthy. So it’s time to do a little more buying.
The two strongest charts in our portfolio now belong to Curaleaf (CURLF) and TerrAscend (TRSSF). And, as I noted above, Canopy Growth (CGC) seems to have bottomed, and I think it’s time to increase our small position in the Canadian leader. Thus the portfolio will now use one-third of its cash, buying equal dollar amounts of CGC, CURLF and TRSSF. After these transactions, the portfolio will be roughly 21% in cash.