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Cannabis Investor
Profit from the Best Cannabis Stocks

July 13, 2022

For many months, I’ve been telling you what a bargain the leading cannabis stocks have become, and now it appears that increasing numbers of investors have come to the same conclusion, as selected stocks have lifted off their bottoms, with some even climbing above their 25-day moving averages.

For many months, I’ve been telling you what a bargain the leading cannabis stocks have become, and now it appears that increasing numbers of investors have come to the same conclusion, as selected stocks have lifted off their bottoms, with some even climbing above their 25-day moving averages.

That’s not enough to say that we have a new uptrend yet, particularly given the still-weak state of the broad market, but it is enough to say (once again) that it’s too late to sell these good stocks—and for new investors, it’s a good time to buy.

Five years ago, when I started writing about cannabis stocks, no one knew who the winners of this young legal industry would be; there were more than a hundred public companies vying for a chance. Today, the picture is much clearer, as scores of contenders have fallen by the wayside and the top five public companies in the U.S. have grown big through both organic growth and acquisition.

Thus the simple way for investors to win, in the long-term, is to own all five of these—which our portfolio does. And the way to beat the industry averages, which we have done in each of the past four years, is to be heavily invested when the sector is strong, take profits near peaks, and retreat partially to cash during the ensuing decline.

In the most recent decline, which began way back in February 2021, we took profits and retreated to a 50% cash position within a day of the top—but my natural optimism kicked in too soon and I started moving back in when I should have stuck to cash. Still we’ve outperformed the indexes, and I fully believe we will once again beat the index this year.

On the news front, what every investor in this sector wants is for the federal government to legalize cannabis. It’s a goal supported by two-thirds of Americans. But there’s been no real achievement on the issue, even on the relatively simple idea of cannabis banking. Most recently, six members of Congress sent a letter to the Biden administration requesting that the executive branch use its authority to decriminalize marijuana. The six were Cory Booker of New Jersey, Bernie Sanders of Vermont, Elizabeth Warren of Massachusetts, Kirsten Gillibrand of New York, Edward Markey of Massachusetts and Ron Wyden of Oregon. There was no response.

Nevertheless, the trend is clear. Legalization will be achieved, and eventually the companies in our portfolio will be household names, with some of their products as well known as Marlboro and Budweiser.

In the meantime, I have some updates, including announcements of impending second-quarter results.

Cresco Labs (CRLBF)
Chicago-based Cresco is the third-largest cannabis company in the U.S., based on first-quarter revenues, but the upcoming acquisition of Columbia Care (CCHWF), which was approved last week by Columbia shareholders, has the potential to make it number one.

When combined, the footprint of the two companies will include more than 130 retail locations across 17 states and Washington, D.C. There’s no word on when second-quarter results will be released, but the action of the stock is encouraging; it’s been climbing for nearly two weeks and is just crossing above its 25-day moving average. BUY

Curaleaf (CURLF)
With 131 retail locations in 22 states, Massachusetts-based Curaleaf was the second-largest multistate operator by revenues in the first quarter, but it’s the clear leader on the perception front; its market capitalization of $3.5 billion tells us investors expect a lot from the company. Its chart isn’t as strong as Cresco’s—CURLF is still basically building a bottom—but it does look like the selling pressure has stopped. Second-quarter results will be released after the market close on August 8. BUY

Green Thumb (GTBIF)
Where Green Thumb stands apart from our first two holdings is its record of posting quarterly profits—seven in a row so far. The company currently has 77 operating retail locations in 15 states (California, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Ohio, Pennsylvania and Virginia). And its stock is similar to Cresco’s, up for nearly two weeks and working to push above its 25-day moving average. Second-quarter results will be released after the market close on August 3. BUY

Innovative Industrial Properties (IIPR)
Our marijuana REIT, Innovative Industrial Properties, has a great business as the country’s leading landlord for cannabis companies. Its latest deal was an amendment of the lease with Green Thumb for improvements and enlargements to its property in Danville, Pennsylvania that has been leased from IIP since 2019. Medical-use cannabis dispensaries in Pennsylvania made their first sales in 2018, and the Pennsylvania legislature is working toward legalizing adult use, working to catch up to neighbors New York and New Jersey which are generating growing tax revenue. While IIP has a large, diverse customer base, Green Thumb is the company’s fourth-largest tenant partner in terms of capital investment. As of June 30, IIP owned 111 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia and Washington, representing a total of approximately 8.6 million rentable square feet. The stock has been basing at 110 for about a month. HOLD

Organigram (OGI)
Organigram is the number three producer of cannabis in Canada, and number one in dried flower, with its flagship brand Edison. And with first-quarter revenues up 117% from the previous year, it’s the fastest-growing company in the portfolio—which is partly possible because it’s the smallest. British American Tobacco (BTI) is a big investor, owning 19.4% of the company. The stock looks good, as it crossed above its 25-day moving average days ago and is now nearing its 50-day moving average—though trading volume has been unusually light. The company will report second-quarter results on July 14 (tomorrow), before the market open. BUY

TerrAscend (TRSSF)
As the smallest of the vertically integrated multistate operators in our portfolio, TerrAscend is a potential acquisition target—perhaps by Canopy (CGC), a major player in Canada. But it’s doing fine on its own. TerrAscend has a strong presence in the Michigan market and is pushing hard in New Jersey, Pennsylvania and Maryland. As for the stock, its chart is the weakest of the bunch, still drifting slightly lower. If I were in a selling mood, I’d sell TRSSF here, but I think any of the leaders will be better than cash when the uptrend comes, so I’m holding, waiting for the entire sector to move higher. HOLD

Trulieve (TCNNF)
While it has long been the biggest seller of marijuana in Florida, where it has a 46% market share and does 70% of its business, Trulieve has been expanding across the country in the past year (it had seven acquisitions in 2021), with the October acquisition of Harvest Health & Recreation (the largest cannabis transaction to date) being the big one. And on July 12, the company announced the opening of a new dispensary in Hollywood, Florida, bringing the count to 172 dispensaries in 11 states, with leading market positions in Arizona, Florida, and Pennsylvania. As for the stock’s chart, like TRSSF, it continues to drift slowly lower, on light volume. In the first quarter, Trulieve reported revenues of $318 million, making it the biggest player in the industry. There’s no word on when second-quarter results will be released. BUY