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Cannabis Investor
Profit from the Best Cannabis Stocks

March 23, 2022

The good news today is that the broad market is looking healthier than it has in many months, thanks to a resurgence by growth stocks.
The bad news is that we still can’t say that cannabis stocks are truly in an uptrend yet—but they might be!

The good news today is that the broad market is looking healthier than it has in many months, thanks to a resurgence by growth stocks.

The bad news is that we still can’t say that cannabis stocks are truly in an uptrend yet—but they might be!

In any case, the valuations continue to improve. With all the stocks in our portfolio selling between 50% and 60% off last year’s high, I think many of these stocks are downright cheap. So I’m standing pat with my current holdings, and once we see a true uptrend develop, I’ll put the portfolio’s 35% cash position into the leading stocks.

For most of these stocks, there’s little news, but Cresco today has a big story.

Cresco Labs (CRLBF) reported fourth-quarter results before the market opened today, and the results were good, plus we got news of a major acquisition! Fourth-quarter revenues were $218 million, up 34% from the year before, a percentage figure that is slightly behind those of peers Curaleaf and Green Thumb. Adjusted EBITDA was $194 million, up 219% from the prior year. And the company ended the year with $224 million of cash, which is nice.

But the big news is the acquisition. It’s Columbia Care (CCHWF), a stock we lost money on last year in the big sector bear market, But I like the company, and now Cresco does too. The acquisition, which will be an all-stock transaction, will make Cresco the de facto leader in the industry, with over $1.4 billion in revenue and an interesting two-pronged strategy.

While Cresco is the wholesale market leader in the industry (wholesale business accounted for 46% of revenues in the fourth quarter, and Cresco is the #1 wholesaler in the U.S. of flower, concentrates and vapes), Columbia is big in retail, with 99 dispensaries and 32 cultivation and manufacturing facilities. After the deal closes, the combined company will have 130 retail stores, representing the #2 retail footprint in the industry.

Going forward, the company will work to grow in both wholesale (which might be quite valuable as competition grows and retail margins are squeezed) and retail, while reducing redundancies and optimizing operational efficiencies.

But the stock was down on the news this morning, as Cresco is using stock to pay a premium for Columbia’s shares. But after this one-time adjustment, I fully expect that Cresco stock will have a bright future—once the sector turns up. The stock is now selling for just two times revenues, the lowest multiple of all the major multistate operators. CRLBF remains the portfolio’s largest position.

Curaleaf (CURLF), which reported earlier this month and is growing at a 39% rate, was the king of the industry in 2021, but will be dethroned, at least temporarily, by the Cresco deal. As for the stock, it’s recovered from the uninformed selling on fears the company was connected to Russia, and its stock now looks very much like the others.

Green Thumb (GTBIF), which reported a 37% growth rate earlier this month, looks similar. There’s no news.

Innovative Industrial Properties (IIPR), our marijuana REIT, reported way back on February 23, so there’s nothing new to report, but the stock is the best-looking in our portfolio, as it’s bounced off support at 180, and is now well above both its 25- and 50-day moving averages. If an REIT makes sense for your portfolio, this is attractive here.

TerrAscend (TRSSF), the smallest of the vertically integrated multistate operators in our portfolio, reported fourth-quarter results March 16. Revenues were $49.2 million, up a hair from the previous quarter but down 1% from the year before. But as the numbers from the Gage acquisition are included in the first quarter’s results, I fully expect to see growth once again. Adjusted EBITDA was $11.9 million, down from $19.3 million the year before—and the loss per share was nine cents, down from a loss of 70 cents the year before. Interestingly, TRSSF has done well in the week since the report was released. It had previously been holding at support since November (and thus had a longer base than any other of the group), but the report triggered new buying, and now the stock is above both it its 25- and 50-day moving averages, the strongest of the multistate operators.

Trulieve (TCNNF) has no news, but the company is due to release fourth-quarter results March 30, before the market open. The stock looks much like those of its peers, but a little heavier, which is probably the result of excessive popularity previously (the flip side of the TerrAscend story).

Verano Holdings (VRNOF) has not yet announced an earnings release date (positive earnings are expected once more), but the company keeps announcing new dispensary openings (the latest two are in the Tampa, Florida area, bringing the company’s total in the state to 43), and stock is ripe for its next uptrend.