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- BDSA data suggests November cannabis sales edged down
- December was a record month for legal cannabis sales in Illinois
- 420 model investor portfolios have returned -4.4% to -1.9% year-to-date, while the Global Cannabis Stock Index has lost 2.9%
Illinois cannabis sales in December rose sharply from November to a record $ 173 million, up 14% from November and 43% from a year ago. BDSA data for November showed stagnant growth in most of the markets it covers.
Over the week, I shared this information with 420 Investor subscribers:
- Composition of the model portfolio 12/31/21
- Cannabis Sub-Sector Review – 12/31/21
- Hifyre’s December Canadian Retail Estimates
- Prepare for Strategic Investments in U.S. Cannabis Companies
- Snapshots of the next Organigram and Tilray financial reports
Here are some of this week’s highlights for 420 names on the Focus Investor List:
- The AAWH publicly berated MedMen for unilaterally terminating its binding agreement to acquire MedMen’s New York operations. He closed two previously announced dispensary acquisitions in Chicago that were previously known as Midway, giving him 8 in Illinois.
- AYRWF announced that it has repurchased 568,000 shares under its previously announced program.
- The CCHWF has opened its 4th dispensary in Virginia.
- CGC has published its first ESG report.
- CURLF has appointed a new president who was previously one of the founders of Grassroots Cannabis following the announcement of the retirement of its COO.
- GNLN President (and former CEO) Aaron LoCascio has resigned. He also loaned the company $ 8 million at 15% for six months.
- GRWG acquired Mobile Media and MMI Agriculture, which manufactures mobile shelving systems for agricultural businesses, for $ 9.4 million.
- SMG announced a 40% year-over-year drop in first quarter revenue for Hawthorne and slashed the full-year growth outlook from -10% to zero from previous guidance from 8 to 12% . The company also announced two acquisitions for $ 225 million, including a lighting company and a seller of coatings and storage solutions for drying and hardening plants.
- TCNNF introduced the brand from a Californian blunt producer to Arizona. He opened his 14th Pennsylvania dispensary.
- TRSSF has appointed a former Parallel executive with extensive experience at Walgreens as the new President and COO.
- UGRO pre-announced annual revenue of $ 65 million, with an order backlog growing from $ 22.5 million in the third quarter to over $ 30 million.
- VFF investor Sundial announced an initial 7.3% stake.
- VRNOF has appointed a new CFO with extensive CPM experience, including the Director of Supply Chain Finance and CFO of US Operations of The Kraft Heinz Company most recently.
The Global Cannabis Stock Index began 2022 by extending the decline that began in February, declining 2.9% to 31.91:
The index, which lost 26% in 2021 after gaining 5.2% in 2020, is down 2.9% in 2022. It currently includes 38 stocks and ended 2021 at 32.85:
420 Investor offers three model portfolios to underwriters, two of which are long-term focused and fully invested with the goal of beating the Global Cannabis Stock Index, 420 Opportunity and 420 Quality. Opportunity 420 ended the week at $ 89,060, down 1.9%. The model portfolio, down 13.8% in 2021 after gaining 35.6% in 2020, is down 1.9% in 2022 and has increased by 78.1% since April 2014 despite the strong loss of the index since then. 420 Quality ended the week at $ 123,532, down 2.2% for the week. It is down 2.2% in 2022 and 21.8% in 2021 after gaining 42.8% in 2020. The model was launched in March 2017 targeting long-term investors looking to invest in major stocks low turnover cannabis portfolio and has gained 147.1% since then. compared to the index’s 60.5% decline since then. Flying High, which focuses on swing trades, ended the week at $ 281,269, down 4.4%. The model portfolio gained 16.6% in 2021 and 52.7% in 2020 and is down 4.4% in 2021. The return since its inception in late 2013 has been 2713%.
The cannabis industry has continued to evolve through several ups and downs over the past few years. 2021 started off with massive fourth-quarter gains but hit a wall in mid-February, slipping the rest of the year after the market got ahead. Disappointment with slow federal reforms or the move towards legalization was a factor, but declining growth in cannabis sales, regulatory delays in several states, and the implosion of the wholesale flower market in California have also been a factor. play a role. In Canada, while the market has continued to grow, the move towards derivatives has been slow. In addition, the biggest LPs have lost market share and have not been able to evolve so far.
The bull market that began in March 2020 after the pandemic and capital crunch that followed the vaping crisis in 2019 appears to be intact for U.S. cannabis operators, who continue to trade significantly higher than where they traded at summer 2020 despite sharp declines since the peak in February. Looking ahead, the outlook looks strong, with major companies moving towards positive operating cash flow and increased access to non-dilutive capital, including debt, mortgages and sale-leasebacks. Several states will switch from medical-only to adult use, including New Jersey, New Mexico, Vermont and Connecticut in 2022, New York in 2023, and Virginia in 2024. Several other states may also switch to legalization of adult use, including Delaware, Florida, Maryland, Minnesota, New Hampshire, Pennsylvania, and Rhode Island. Several states are also expanding their programs, with additional dispensaries coming to Illinois. The medical-only state of Minnesota will add flowers and edibles in 2022, and Ohio is expanding its program as well. Growing competition in some state markets weighing on profitability will likely remain a challenge. Also, while many see federal legalization as a positive, in my opinion it remains a potential risk factor.
While shares of U.S. cannabis companies continue to be held primarily by retail investors, 2021 has seen an increase in institutional investment. Another big development has been the growth of AdvisorShares Pure US Cannabis ETF (MSOS), which has broadened access to cannabis companies for investors who do not trade stocks over-the-counter. Additionally, a number of ancillary companies have gone public and trade on higher stock exchanges, providing institutional investors with a way to invest in the sector. We have seen several investments in U.S. cannabis companies, mostly by Canadian production companies, but in the future, strategic investments through creative financial structures will likely extend to CPG companies in 2022.
At the federal level, the FDA (or Congress) could clarify the regulation of CBD. When it comes to THC, Democrats (Cannabis Administration and Opportunity Act) and Republicans (States Reform Act) are pushing forward legislation to legalize cannabis. While this is in my opinion a long process due to the complexity (varying state regulations, role of the FDA, social fairness, taxation), it is very different from what the developing cannabis industry has faced there. Just a few years ago: potential crackdowns on state legalization. I remain hopeful that Congress can push forward with small reforms, including expanded research and SAFE Banking. Stronger financial reform that would explicitly allow companies operating in state-legal cannabis to trade on higher exchanges would be hugely positive.
Beyond America, the legalization of cannabis continues to proliferate. Although Canada remains the largest market for legal cannabis federally, many other countries have medical programs, including Argentina, Chile, Colombia, Ecuador, Peru, and Uruguay (fully legal) in South America. Mexico has legalized possession but does not yet have a regulated program, and it may legalize adult use as well. Australia’s medical program was slow to start but has gained ground. New Zealand also has a medical program. In Africa, several countries have legalized medical cannabis. Europe, of course, has seen the widespread adoption of medical cannabis. Germany has been slow to develop but could move towards legalization for use by adults. Other markets where there is medical cannabis are Denmark, Greece, Italy, the Netherlands, Poland and Portugal. The UK and Israel have medical cannabis, and Israel may move towards legalization for adult use. Of course, let’s not forget Jamaica!
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